The Eurozone economy enters a contraction phase for the first time in 2025.

The latest data has shown a decline in economic activity in the Eurozone to contraction levels during the current month of May, for the first time since the beginning of the current year, amid weak demand and declining business confidence.

A report released by "S&P Global" on Thursday, May 22, revealed that the Purchasing Managers' Index (PMI) in the Eurozone dropped to 49.5 points, compared to 50.4 points in April, marking its first contraction this year. The reading was below analysts' expectations of 50.7 points.

The services sector index also decreased to 48.9 points, the lowest level since January, while it was expected to reach 50.3 points.

The report indicated that weak demand led to a decline in optimism among service companies about next year's prospects, while the manufacturing sector showed signs of significant recovery.

In this regard, Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, commented: "It seems that the Eurozone economy cannot find its footing. Since January, the Purchasing Managers' Index (PMI) has shown extremely slight growth, and in May, the private sector actually contracted."

He added: "The broad-based recovery in the manufacturing sector, with encouraging signs from both Germany and France. Further interest rate cuts could provide a boost, and the decrease in oil prices compared to last year also helps."

The industrial Purchasing Managers' Index recorded its highest level in 33 months at 49.4 points, supported by some factories' initiatives to lower prices to stimulate demand. As a result, the price index dropped to 49 points, the lowest in five months.

This comes after the European Central Bank's decision to cut interest rates for the seventh time in the past year, while markets expect an additional 25 basis points cut next month.