Euro zone business growth solid in May but shows signs of easing -flash
PMI
Send a link to a friend
[May 23, 2023] By
Jonathan Cable
LONDON (Reuters) -Euro zone business growth remained resilient but
slowed slightly more than thought this month as the bloc's dominant
services industry lost a little of its shine and the downturn in the
manufacturing sector deepened, a survey showed on Tuesday.
HCOB's flash Composite Purchasing Managers' Index (PMI) for the bloc,
compiled by S&P Global and seen as a good gauge of overall economic
health, fell to 53.3 in May from April's 54.1.
While still comfortably above the 50 mark separating growth from
contraction it was below a Reuters poll estimate for 53.5.
"Despite signalling a slower pace of growth in May, the overall PMI
results so far in Q2 are, at face value, signalling a solid GDP gain.
But this is at odds with other survey and hard data," said Ricardo Amaro
at Oxford Economics.
"The forward-looking indicators from the PMIs also temper optimism,
showing new orders growth near-stalled in May, while confidence fell to
a five-month low. Overall, we remain comfortable with our subdued
outlook for Q2 and beyond."
![](http://archives.lincolndailynews.com/2023/May/23/images/ads/current/chuckglass_sda_SHG_2023.png)
With prices still rising sharply and indebted households having to pay
increased borrowing costs, overall demand growth waned sharply. The new
business index dropped to 50.4 from 52.5.
In Germany, business activity expanded for a fourth month running,
driven exclusively by a services sector revival that more than offset a
manufacturing decline in Europe's largest economy.
But in France, activity expanded at the slowest pace in four months as
manufacturing continued to contract and growth in the dominant services
sector decelerated.
British services companies increased prices at a rapid pace as they saw
another month of strong demand, likely adding to the Bank of England's
worries about the persistence of high inflation.
A PMI for the euro zone services industry dipped from April's one-year
high of 56.2 to 55.9, beating the Reuters poll prediction for a steeper
fall to 55.6.
[to top of second column] |
![](../images/052323PIX/busine56.jpg)
People enjoy an evening drink at Place
de la Contrescarpe in Paris as cafes, bars and restaurants reopen
after closing down for months amid the coronavirus disease
(COVID-19) outbreak in France, May 19, 2021. REUTERS/Sarah
Meyssonnier
![](http://archives.lincolndailynews.com/2023/May/23/images/ads/current/graue_lda_WHITETRUCKpreowned_052223.jpg)
Despite a slowing of new business growth, services firms increased
headcount at a strong pace - the employment index was at 55.0,
albeit lower than April's 11-month high of 55.6.
Meanwhile demand for manufactured goods sank and the factory PMI
fell to 44.6 from 45.8, its lowest since May 2020 when the
coronavirus pandemic was cementing its grip on the world. The
Reuters poll had predicted a reading of 46.0.
An index measuring output, which feeds into the composite PMI, fell
to a six-month low of 46.3 from 48.5.
But largely healed supply chains and lower energy prices meant input
costs for factories fell at the fastest pace in over seven years,
allowing factories to cut their prices for the first time since
September 2020. The output prices index sank to 49.0 from 51.6.
That may be welcome news to policymakers at the European Central
Bank, who despite embarking on their most aggressive tightening path
ever have so far failed to get inflation back to the 2.0% target.
However, prices charged by services firms rose faster and the ECB is
expected to add another 25 basis points to the deposit rate next
month and in July, despite many of its peers having already paused
rate hikes or doing so soon, a Reuters poll found.
![](http://archives.lincolndailynews.com/2023/May/23/images/ads/current/charrons_bch_2022.png)
"Prices pressures are still strong with both the input and output
price PMIs high by historical standards, supporting the case for the
ECB to raise rates further," said Andrew Kenningham at Capital
Economics.
(Reporting by Jonathan Cable; Editing by Susan Fenton)
[© 2023 Thomson Reuters. All rights
reserved.]
This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content. |