Germany's Private Sector Activity Contracts for Second Month in May

Germany's private sector activity contracted for the second consecutive month in May, impacted by the Iranian war, which has hindered economic recovery, suppressed demand, and driven up prices. According to Jin10, the preliminary composite Purchasing Managers' Index (PMI) for Germany, compiled by S&P Global, slightly increased from 48.4 to 48.6, surpassing market expectations of 48.4. However, the index remains below the 50 threshold, indicating a contraction in economic activity. The preliminary PMI for the services sector rose from 46.9 to 47.8, yet it also stayed below the 50 mark. Meanwhile, the manufacturing sector stagnated, with its index falling from 51.4 to 49.9. Phil Smith, the Associate Director of Economics at S&P Global Market Intelligence, stated, "With the preliminary PMI for May showing a decline in business activity for the second month in a row, the German economy is set to contract in the second quarter of this year." The decline was primarily led by the services sector, where business activity decreased for the second consecutive month, although at a slower pace than in April. "In manufacturing, the boost from efforts to build inventories in response to rising prices and supply shortages appears to be fading," Smith added.