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HCOB's final Composite Purchasing Managers' Index (PMI),
compiled by S&P Global and seen as a good gauge of overall
economic health, fell to a three-month low 52.8 in May from
April's 54.1.
While still comfortably above the 50 mark separating growth from
contraction it was below a preliminary estimate for 53.3.
"Relatively resilient services activity growth should ensure
that the euro zone regains some footing and shows a positive
rate of expansion in the second quarter after GDP stagnated in
the October-March period," said Cyrus de la Rubia, chief
economist at Hamburg Commercial Bank.
A PMI covering the services sector dropped to 55.1 from April's
one-year high of 56.2, below the 55.9 flash reading. A
manufacturing PMI released last week showed the downturn in
factory activity deepened as demand slumped despite prices
falling.
Overall cost pressures were lower in May and both the composite
input and output prices indexes fell. The output index dropped
to 56.4 from 56.8, its lowest since April 2021.
While that will likely be welcomed by policymakers at the
European Central Bank who have yet to get inflation down to
target it was largely down to factories reducing prices as
services firms, closely watched by the ECB, increased their
charges faster.
Despite that, demand for services continued to rise and firms
increased headcount, albeit at a slower pace. The employment
index dipped to 54.6 from April's 11-month high of 55.6.
"The services sector is being supported by the strong labour
market, rising wages and a tourism sector that is flourishing
throughout Europe," said de la Rubia.
"The latter is confirmed by the new export business PMI, which
includes tourism-related demand and remained near its series
peak in May."
(Reporting by Jonathan Cable; Editing by Toby Chopra)
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