Eurozone Economy Records Largest Contraction in Over Two Years

Sana'a: Economic activity in the eurozone recorded today, Friday, its biggest contraction in more than two and a half years during the current month, affected by rising living costs resulting from the conflict in the Middle East, which led to declining demand for services and an acceleration in job cuts across Europe. According to Yemen News Agency, the Eurozone's composite Purchasing Managers' Index (PMI) fell to 47.5 points, compared to 48.8 points in April, according to data released Thursday by Standard and Poor's Global, a financial information provider. This marks its lowest level since October 2023, according to Western media reports. Andrew Cunningham of Capital Economics said, "The data reinforces concerns that the Eurozone economy will enter a recession in the second quarter, given the continued rise in production costs and prices, which could prompt the European Central Bank to adopt a tighter monetary policy," as reported by Sputnik. In Germany, Europe's largest economy, the private sector cont inued to contract for the second consecutive month, while France recorded its lowest Purchasing Managers' Index (PMI) reading in five and a half years, as pressures related to fuel and energy prices mounted and economic concerns intensified. In Britain, businesses experienced their sharpest decline in activity in over a year, driven by the economic fallout from the Middle East conflict and domestic political uncertainty. Data showed a sharp drop in overall demand across the eurozone, with new orders falling at their fastest pace in 18 months and export orders declining at the fastest rate since January 2025. The services sector, the region's main economic driver, saw its fastest contraction since February 2021, with its index falling to 46.4 from 47.6 in April. Meanwhile, the manufacturing PMI fell to 51.4, and the output index dropped to 51.0, amid supply chain disruptions stemming from geopolitical tensions and the closure of the Strait of Hormuz. Price pressures have also intensified significantly, wit h input cost inflation reaching its highest level in three and a half years, while prices for goods and services rose at their fastest pace in 38 months. This prompted Standard and Poor's Global to warn that inflation could approach 4% in the coming months. The European Central Bank (ECB) kept interest rates unchanged last month but discussed the possibility of raising them in June to combat inflationary pressures.