Euro area economic sentiment picks back up a little in May but headwinds linger

Euro-area economic sentiment improved slightly in May, with the headline index at 93.5 (vs 92.8 expected and prior 93.0, revised to 93.2). The gain was modest and the series remains well below its long-term average of 100 as headwinds from the Middle East conflict, higher prices and supply-chain strains persist. Industrial confidence fell further to -8.0 while services rebounded to 2.2; retail trade and construction confidence weakened. The employment indicator edged up to +2.1, driven by services and retail hiring plans. Selling-price expectations cooled to 27.4 from 30.2 but remain elevated, signalling embedded inflation risks that could weigh on growth and influence ECB policy considerations and euro-sensitive markets.