Eurozone May Manufacturing PMI Drops to 51.6; Expansion Slowed by Soaring Costs and Supply Chain Disruptions

(1) The Eurozone's Manufacturing Purchasing Managers' Index (PMI) for May fell to 51.6 from April's nearly four-year high of 52.2, slightly above the preliminary reading of 51.4. (2) Although the sector has remained in expansion territory for the fourth consecutive month, momentum is weakening amid surging prices and supply chain disruption pressures related to the Middle East conflict. (3) The supplier delivery times index became a notable outlier: although it indicated the most severe delays since June 2022, it made a positive contribution to the overall PMI, as historically longer delivery times correlate with higher manufacturing activity. (4) However, new orders stagnated, the pace of production slowed, and input and output prices soared to four-year and three-and-a-half-year highs, respectively. Employment continued to decline, and business optimism remained subdued.