The decline comes amid the conflict in the Middle East, which has caused what the report describes as “severe supply-chain disruption.”
The seasonally adjusted Purchasing Managers' Index (PMI) for the eurozone dropped to 48.6 in April from 50.7 in March. A reading below 50 indicates a contraction in economic activity.
The downturn at the start of the second quarter was driven by the service sector. Business activity in services declined for the first time in nearly a year and at the sharpest pace since February 2021. In contrast, manufacturing output continued to expand, growing at the fastest rate since last August. The increase was partly due to customers placing additional orders to build up inventories in anticipation of potential disruptions.
The report pointed to a broad-based decline in business activity across the eurozone, including in Germany and France, the EU’s two largest economies.
Analysts expect the European Central Bank to raise interest rates this month in an effort to curb inflation.
