German Private Sector Contracts for Second Month as Energy Shock Pressures Growth

(MENAFN) Germany’s private sector activity declined for a second consecutive month in May, reflecting ongoing economic strain and raising concerns about broader spillover effects linked to global energy disruptions.

According to reports, the S&P Global Composite Purchasing Managers’ Index (PMI) for Germany rose slightly to 48.6 in May from 48.4 in April, but remained below the 50-point threshold that separates economic expansion from contraction.

Both manufacturing and services sectors continued to weaken, as firms faced persistent challenges from subdued demand, elevated inflation, and rising operational costs. Analysts had expected a stronger rebound, but overall performance remained under pressure.

An economist cited in the report said, “The German economy is on course to contract in the second quarter,” pointing to fading momentum in manufacturing and the exhaustion of earlier stockpiling effects that had temporarily supported production.

Germany had begun the year with relatively stronger growth, but expectations have since deteriorated as energy costs and supply-side pressures weigh on business confidence. Government projections have also been revised downward, with growth forecasts cut significantly.

Across the wider eurozone, similar concerns are emerging. Industrial activity in key economies such as France has also weakened, reaching multi-year lows, while inflation remains elevated across the region.

Rising borrowing costs are adding further pressure, as policymakers at the European level consider potential monetary tightening in response to persistent price increases. Some central bank officials have signaled that further action may be necessary if energy-related shocks continue to affect inflation dynamics.

Euro area inflation remains above target, reflecting ongoing cost pressures across energy and production sectors, with uncertainty continuing to shape the region’s economic outlook.

MENAFN21052026000045017281ID1111149116