BENGALURU (Reuters) – Euro zone business activity surged to its highest rate in a year this May, spurred by robust growth in the services sector that offset declines in manufacturing, according to a private survey. The survey also indicated a reduction in price pressures.
ECONOMIC CALENDAR ON 05 JUNE, 2024 (myfxbook)
The HCOB composite Purchasing Managers’ Index (PMI) for the euro zone, compiled by S&P Global, climbed to 52.2 in May from 51.7 in April, marking its strongest performance since May 2023. Although slightly below the preliminary estimate of 52.3, the index remained above the 50 threshold that differentiates growth from contraction for the third consecutive month.
“The threat of recession has diminished, thanks to the expanding service sector,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. “The services sector is set to drive positive growth for the euro zone in the second quarter.”
The services PMI slightly dipped to 53.2 in May from April’s 11-month high of 53.3, narrowly missing the flash estimate of 53.3.
A separate survey released on Monday suggested a potential turnaround for the beleaguered manufacturing sector, with its activity index rising to 47.3 in May from 45.7 in April.
Improved overall demand has bolstered optimism for the future, with the composite future output index reaching 63.1 in May, its highest level since February 2022. This optimistic outlook has prompted service firms to expand their workforce at the fastest rate in 11 months.
At the same time, price pressures have eased, with output prices increasing at their slowest rate in six months. This trend may reassure the European Central Bank, which is expected to implement a 25-basis-point interest rate cut on Thursday.
“Inflation pressures are declining in both costs and selling prices,” added de la Rubia. “However, the PMI price indices remain unusually high given the relatively weak economic conditions.”