Eurozone business activity accelerated in May but prices charged by companies “softened” from the previous month, a major survey showed.
S&P Global's flash HCOB Eurozone Purchasing Managers' Index (PMI) rose to 52.3 from 51.7 in April, the highest level in 12 months. A reading above 50 indicates growth, while a reading below 50 indicates contraction.
Cyrus de la Rubia, chief economist at the Hamburg Commercial Bank (HCOB), said the data showed the single currency area's economy was “getting even stronger”.
Meanwhile, “both input cost and output price inflation have softened since April,” which would be “good news” for the ECB, he said.
“This would support the ECB's clear stance to cut rates at its June 6 meeting,” Dell'Arrubia said.
Advertisement – Scroll to continue
But he warned that “the improving inflation outlook alone will probably not be enough for central banks to announce further rate cuts.”
Based on the data, HCOB expects growth of 0.3% in the second quarter of 2024.
The 20-nation bloc's economies grew 0.3 percent in the first three months of this year, according to official EU data.
Advertisement – Scroll to continue
Rory Fennessy, senior euro zone economist at Oxford Economics, said the euro zone's recovery “will be gradual as easing monetary policy will not provide a meaningful boost to growth until next year.”
The rise in the PMI index was led by the services sector, which saw activity increase for the fourth consecutive month, helped by new business.
However, while the rate of decline in manufacturing slowed, it still remained below 50.
Advertisement – Scroll to continue
Germany, the European Union's largest economy, is remaining strong after a difficult 2023.
“The German economy is outperforming the French economy, driven by strong growth in the services sector, which is shrinking in France,” de la Rubia said.
But he added that there was “absolutely a chance” that France's services sector could catch up.
Arora's/ec/lth
