• Services PMI 42.9 vs 46.6 expected
• Prior 46.5
• Manufacturing PMI 48.9 vs 52.2 expected
• Prior 52.8
• Composite PMI 43.5 vs 47.7 expected
• Prior 47.6

Welp, there goes the floor. The pain is starting to hit now as the fallout from the Middle East conflict intensifies. The headline services print and the composite print are the lowest in 66 months, marking the steepest decline in French economic activity in five-and-a-half years. Yes, it’s the biggest dip in activity since the Covid pandemic period.

Firms frequently cited fuel and energy cost pressures, as well as general economic angst, as reasons for lower output.

And after some frontloading activity in March and April, manufacturing output also fell back into contraction territory in May.

In adding insult to injury, inflation pressures continue to accelerate with cost pressures being the strongest since May 2023. The graph below pretty much says it all:

If you’re not thinking about stagflation hitting Europe just yet, this definitely ought to be a good wake up call to that.

S&P Global notes that:

“May’s ‘flash’ PMI survey for France provides a dire set of numbers. The inflationary impact of the oil-price shock continues to proliferate, with price indices in both manufacturing and services moving higher once again. The surge in oil prices has hit households and businesses both directly at the fuel pumps, and indirectly as higher transportation and production costs are passed through to final goods and services. The concern is that a broader uplift in the economy’s overall price level raises the risk of further demand destruction. Alarmingly, we saw private sector new orders plummet in May, giving us a clear indication that this shock has materially lifted recession risks for the eurozone’s second-largest economy.”

This article was written by Justin Low at investinglive.com.