Euro area private sector activity grew at its fastest pace in a year in May, driven by strong gains in new orders, employment and an improving economic situation. work Confidence fell, according to preliminary survey data from S&P Global.
The preliminary composite production index rose to 52.3 in May from 51.7 in the previous month. The score also beat economists' expectations of a 52.0 reading.
The score suggested that growth in economic activity accelerated for a second straight month, recording the fastest expansion in a year. The overall expansion was led by the services sector, but the pace of growth was unchanged from April.
The services purchasing managers' index was flat at 53.3 in May, below the forecast of 53.6.
Manufacturing activity remained in negative territory for the 14th consecutive month, but the PMI rose to a 15-month high of 47.4 from 45.7 in the previous month. The score is estimated at 46.2.
New orders growth strengthened overall in May, boosted by solid expansion in the services sector, pushing the pace to a 13-month high, while new orders at the manufacturing sector continued to decline.
Employment grew at its strongest pace since June last year, driven by a rise in new orders. In line with production and new orders, job gains were concentrated in the services sector.
Businesses continued to scale back purchasing activities, with inventories of both purchased and finished goods declining, and supplier delivery times continuing to shorten.
On the price side, the survey found that both input and output price inflation eased in May, but both remained above pre-pandemic averages.
Businesses became more optimistic about future business activity, with confidence hitting its highest level since February 2022.
Silas de la Rubia, chief economist at Hamburg Merkbank, said taking into account the PMI figures and leaving aside fears of a recession, the euro zone was likely to achieve growth of 0.3 percent in the second quarter.
Of the currency area's two biggest economies, Germany's private sector grew the most over the year, while France's fell into contraction zone.
Germany's private sector recorded its fastest expansion in a year in May, driven by strengthening services activity. The flash HCOB headline production index rose to a better-than-expected 52.2 in May from 50.6 in April. The expected score was 51.0.
Growth continued to be driven by the services sector, the survey showed. Moreover, the drive from the manufacturing sector eased significantly in the middle of the second quarter.
The services PMI rose to 53.9, the highest level in 11 months, from 53.2 in April and beating economists' expectations of 53.5.
At the same time, the manufacturing PMI rose to 45.4 from 42.5 in the previous month. The reading is expected to be 43.4.
France's private sector unexpectedly contracted in May after returning to growth in the previous month. The key HCOB flash headline composite production index fell to 49.1 in May from 50.5 in April. The reading had been expected to rise to 51.0.
The services PMI came in at 49.4 in May, down from 51.3 in April and economists' expectations of 51.8.
Meanwhile, the manufacturing PMI rose to a three-month high of 46.7 from 45.3 in the previous month, beating the forecast of 45.8.
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