The eurozone's manufacturing sector shrank markedly again in May, albeit at a slower rate than April's record contraction.
Deflationary pressures are building across the sector, IHS Markit said in its monthly manufacturing Purchasing Managers' Index (PMI) report. It said input costs fell for a 12th consecutive month, mostly driven by falling prices for oil-related items, and manufacturers again discounted heavily on their output as they looked to work through inventory.
IHS' PMI reading was 39.4 last month, up from 33.4 in April but still some way below the 50 reading that marks the change from contraction to expansion.
The firm's chief business economist Chris Williamson said there is a high degree of uncertainty about whether even this small level of month-on-month growth can achieve any momentum.
"Demand both domestically and in export markets looks set to remain subdued by social distancing measures, high unemployment and falling corporate profits for some time to come," he said, noting that there are likely to be exceptional falls in industrial production and in GDP in the current quarter.
This situation could continue for the rest of the year. The European Commission's most recent forecast for the eurozone's economic performance is for a 7.7pc contraction this year, which is broadly in line with the IMF's contemporaneous outlook. The commission sees harmonised consumer price index (HCPI) inflation in the common currency bloc at just 0.2pc this year.
