THE TAKEAWAY: Eurozone PMI Composite hits 3-year low -> Markit Economics predicts -0.5% contraction in Q2 -> Euro reverses earlier gains

Eurozone manufacturing and services output has reached the lowest level since June 2009, according to the Markit Economic’s Purchasing Managers’ Index survey. The PMI composite index came in at 46.0 for May, slightly above the previously estimated 45.9. The Eurozone composite PMI has fallen for four straight months, since January’s index signaled increased output. A PMI survey under 50 points to contracting output.

The lower PMI’s indicate a slowing economy in Europe, even the usually strong Germany showed contracting output. The German PMI composite fell to a 34-month low 49.3 in May, down from April’s positive 50.5 result. French and Spanish PMI composite drops also accelerated during May.

PMI services for individual euro countries were also finalized this morning; Germany’s PMI for services was reported as expanding according to the 51.8 result for May, still lower than the previously estimated 52.2. France and Italy both had contracting services output, although Italy’s PMI result of 42.8 was better than the estimated 42.0 and April’s 42.3 reported index.

Markit Economics reported that weakness in demand led to further job losses among services and manufacturing industries. However, a slight rise in German jobs during May softened the unemployment numbers for the Eurozone on the whole. Markit’s Chief Economist Chris Williamson predicted a 0.5% contraction in the Eurozone’s Q2 GDP, according to the report.

G7 leaders are rumored to be meeting today to discuss ways to improve the European economy and help Greece avoid an exit from the single currency. German Prime Minister Angela Merkel has thus far said that she won’t support joint euro-denominated government bonds.

Euro_Back_on_the_Decline_Despite_Softer_PMI_Results___body_eurusd.png, Euro Back on the Decline Despite Softer PMI Results

EUR/USD reversed earlier day gains in the hours leading up to the PMI release, likely falling due to sentiments around the possible G7 meeting and recent negative comments from the Spanish budget minister.