Eurozone Private Sector Logs Fastest Growth In A Year

(RTTNews) - Eurozone private sector posted the fastest growth in a year in May as strong demand boosted production and hiring amid cooling inflation, the final Purchasing Managers' survey data compiled by S&P Global showed on Wednesday.

The HCOB composite output index posted 52.2 in May, up from 51.7 in the previous month. The flash reading was 52.3.

The reading indicated that the private sector showed the strongest increase in economic activity since May 2023.

The services PMI came in at 53.2 in May, which was broadly unchanged from April's 11-month high of 53.3. The flash reading was also 53.3. The survey showed that the upturn was underpinned by stronger demand conditions.

New orders increased at the fastest pace since April 2023. Improved sales performances were restricted to domestic markets as new business from abroad declined, in line with the trend since March 2022.

Confidence among survey respondents improved in seven of the last eight months. The level of positive sentiment was its highest since February 2022.

Eurozone companies raised employment for a fifth straight month and the rate of job creation was unchanged from April and was therefore the joint-fastest since June 2023.

The survey suggested that there remained no evidence of operating capacities becoming stretched by the uptick in sales as backlogs of work fell for a fourteenth month in a row.

Price indicators showed that inflationary pressures are cooling across the euro area. The increase in input costs remained sharp and output prices increased notably but the rate of inflation eased to a six-month low. "The specter of recession is off the table," Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said.

The price components for the service sector indicate a slight easing of inflationary pressures, making an ECB rate cut on June 6 more likely, de la Rubia noted.

The PMI price indices do not yet give the all-clear, as they are unusually high in the context of the rather weak economic situation, the economist added.

Of the big-four economies, France was the only nation to report renewed contraction. Germany and Spain logged faster growth, while Italy's private sector growth cooled to its lowest level since February.

Germany's private sector growth gathered momentum in May with the pace of expansion reaching one-year high, survey data showed. The final HCOB composite output index rose to 52.4 from 50.6 in April. The flash score was 52.2.

The services PMI posted a 12-month high of 54.2 in May, up from 53.2 in April. The score was well above the initial estimate of 53.9.

France's private sector slipped into the contraction territory in May. The composite output index registered 48.9 in May, down from 50.5 in April and the flash reading of 49.1.

The services PMI fell to 49.3 in May from 51.3 in the prior month. The initial reading for May was 49.4.

Italy's private sector growth softened in May as services continued to lead the expansion in output, while the downturn in manufacturing production deepened.

The HCOB composite output index slid to 52.3 in May from 52.6 a month ago. The services PMI registered 54.2 in May, down marginally from April's 54.3 and economists' forecast of 54.4.

On the other hand, Spain's private sector growth accelerated to a 14-month high in May, thanks to faster expansion of both manufacturing and service sectors.

The composite output index rose to 56.6 from 55.7 in April. The services PMI registered 56.9 compared to 56.2 in April. The score was forecast to rise to 56.5.