The eurozone’s services sector slowed further during May, adding to fears of a further contraction in the second quarter thanks to the escalating debt crisis.
The monthly purchasing managers or PMI survey revealed that activity among service providers fell to 46.7 in May from 46.9 in April. The further activity falls below the 50 level, the worse it is doing.
This means that activity has fallen in eight of the past nine months, and May was the weakest in seven months. It follows a survey of manufacturers on Friday which revealed activity fell for the tenth straight month.
Both surveys together reveal that the private sector within the eurozone contracted at the fastest pace in three years, with the composite PMI falling to 46.0 from 46.7.
The readings will add to concerns that Spain could be next in line for a bailout.
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They are also proof of the damaging nature of austerity measures which have been rolled out across the bloc. Austerity stifles growth and makes it more difficult for governments to repay debts. Yesterday Cyprus was told by the EC that it could avoid a bailout if it stuck to the measures laid out for it.
“Companies report business activity to have been hit by heightened political and economic uncertainty, which has exacerbated already weak demand both in the euro area and further afield,” Markit chief economist Chris Williamson said.
The survey will make grim reading for the members of the European Central Bank’s governing council as they prepare to meet on Wednesday.
Despite signs that inflationary pressures are easing, they are expected to leave the central bank’s key interest rate unchanged at 1.0 per cent.
While London was closed for day two of the Queen’s Diamond Jubilee celebrations, markets across Europe remained open, and were trading relatively flat, thanks to news that the G7 would meet to hold emergency talks on eurozone stimulus. During late morning trading the Dax in Frankfurt was down 1.02 per cent at 5918, the Cac 40 in Paris was up 0.3 per cent at 2964, and the Ibex in Madrid up 0.54 per cent at 6272.