New findings from the American financial analytics firm S&P Global show that economic activity across Europe has fallen to its weakest level since October 2023, adding to concerns over inflation, rising living costs, and slowing demand across the European Union.
According to the report, higher energy and fuel prices have sharply reduced activity in both the manufacturing and services sectors, increasing pressure on households, businesses, and labor markets.
Economists warn that although the current situation is not yet comparable to the stagflation crisis of the 1970s, continued deterioration could deepen Europe’s post-pandemic cost-of-living crisis.
In Germany, Europe’s largest economy, private sector activity contracted for a second consecutive month.
France also recorded a major slowdown, with economic indicators falling to their lowest level in more than five years.
Analysts at JPMorgan described the latest data as Europe’s weakest economic performance since late 2023 and said early signs of recession are now appearing in May’s figures.
The European Commission has also lowered its growth forecast for the European Union and warned that continued energy instability could reduce growth even further than current projections.
Current estimates suggest EU economic growth could slow to around 0.9 percent in 2026.
In the United Kingdom, businesses reported the sharpest decline in economic activity in more than a year, a slowdown some analysts linked to instability connected to the Iran conflict and domestic political uncertainty.
Reports show that new private sector orders and export demand have both dropped significantly across Europe.
The services sector, considered the main engine of the European economy, recorded its steepest contraction since February 2021, with the index falling from 47.6 in April to 46.4 this month.
At the same time, inflation in input costs has climbed to its highest level in more than three and a half years, while prices for goods and services are rising at the fastest pace seen in 38 months.
S&P Global warned that inflation could remain close to 4 percent in the coming months.
Europe’s labor market is also weakening, with companies cutting jobs for the fifth consecutive month in what analysts describe as the sharpest employment decline since November 2020.
Although the European Central Bank kept interest rates unchanged at the end of last month, markets now expect another rate increase in June as policymakers attempt to contain inflation.
