Business activity in the euro area has plunged to a three-year low. The PMI index which measures the performance of the manufacturing sector in May decreased beyond expectations to 45,9 points from 46,7 points in April. It thus confirms itself in recessive territory for the fourth consecutive month and marks a 35-month low. This was revealed by the data released by the research firm Markit Economics. The deterioration also involved the services.
In the private sector, new orders fell for the tenth consecutive month, more significantly in the manufacturing sector than in the tertiary sector. Indeed, the only hope for the future comes from the services: Markit's expectations in the tertiary sector have remained positive, even if they appear to be at a level well below the trend recorded before the crisis period. The optimism rate was up slightly from its three-month low recorded in April, but still remains the second weakest since January.
Furthermore, in May private sector employment in the 17 countries of the monetary union decreased for the fifth consecutive month. The rate of job losses fell modestly from April's figure, which set a 26-month high. “Corporate profits,” reads the release, “are under increased pressure” from demand reduction “and have therefore continued to focus on layoff activities. The rate of job cuts, despite being slightly weaker than in April, is at its highest level since early 2010”.
According to Chris Williamson, chief economist at Markit, May data suggest that the crisis in the eurozone has worsened and correspond to a contraction in terms of GDP of 0,5 per cent, in the ssecond quarter compared to the first three months of the year. “An ever-growing contraction in peripheral countries has also spread to France and Germany. France indicated the sharpest deterioration in operating conditions in three years, and even Germany is likely to see GDP fall slightly in the second quarter if the situation continues to worsen in June.
