The euro zone's private sector expanded at its fastest pace in a year in May as strong demand boosted output and employment amid slowing inflation.
The S&P Global/Hamburg Commercial Bank (HCOB) composite production index rose to 52.2 in May from 51.7 in the previous month. The May reading marked the strongest increase in economic activity since May 2023.
Cyrus de la Rubia, chief economist at HCOB, said: “Fears of a recession have been dispelled, thanks to the services sector, where the recovery has recently grown. Germany is now on the upswing, business activity in Italy remains robust and Spain has further improved from an already strong position. Only France has retreated, falling slightly negative. Overall, the services sector will likely ensure that the euro area will once again show positive growth in the second quarter.”
Meanwhile, in the United States, the contraction in factory activity accelerated in May as production nearly stagnated. The Institute for Supply Management's manufacturing purchasing managers' index fell to 48.7 in May from 49.2 in the previous month, the research group said on Monday, noting that survey respondents cited an increased mention of “softening.”
That marked the second straight month of decline and the second month the index has dipped below 50, the level that separates expansion and contraction. Economists had expected a median reading of 49.6. U.S. manufacturers face multiple headwinds, including rising borrowing costs, weak consumer spending, sluggish business investment and the persistent challenge of rising input costs.
Finally, Germany's unemployment rate remained at a sixth consecutive month low in May, reflecting a robust jobs market.
Germany, Europe's largest economy, reported a seasonally adjusted unemployment rate of 5.9 percent, the same level for the sixth consecutive month and in line with expectations. Meanwhile, the number of unemployed rose to 2.762 million, up 25,000 and well above the 10,000 expected. It was the 17th consecutive month that the unemployment rate has risen, with the total number of unemployed hovering around a three-year high. Federal Labor Office Chief Executive Andrea Nahles said the spring economic recovery hadn't really taken hold this year. Unemployment and underemployment also fell in May, but not as sharply as in most previous years, Nahles added.
This article does not constitute legal and/or financial advice and has been issued for information purposes only by Bank of Valletta plc, 58, Zachary Street, Valletta. Bank of Valletta is a public limited company regulated by the MFSA and licensed to carry out banking and investment services activities under the Banking Act (Chapter 371 of the Laws of Malta) and the Investment Services Act (Chapter 370 of the Laws of Malta).
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