2024-05-23 06:14:48 ET
Private sector activity in the euro area continued to expand in May, according to a preliminary report released on Thursday by S&P Global and the Hamburg Commercial Bank (HCOB).
The composite purchasing managers' index (PMI) rose to 52.3, the highest level in 12 months, from 51.7 in April.
Manufacturing PMI rises to highest level in 15 months
The services sector PMI was unchanged from April at 53.3, indicating solid growth.
However, manufacturing saw a strong improvement, with the PMI jumping to a 15-month high of 47.4 from 45.7 in the previous month.
The rise reflects a stronger recovery in the euro area's industrial base.
Implications for the European Central Bank
Cyrus de la Rubia, chief economist at Hamburg Merchant Bank, pointed to positive developments on inflation.
There is also good news for the European Central Bank (ECB), with services sector input and output price inflation falling month-on-month, which should support a clear interest rate cut from the ECB at its June 6 meeting.
While the inflation outlook is improving, Dellalrubia warned against expecting further rate cuts in the near term.
The improving inflation outlook alone probably won't be enough for the central bank to announce further rate cuts.
Eurozone economic outlook
These findings provide a nuanced backdrop for monetary policy decisions as the ECB prepares for its next meeting: the balance between sustaining growth and keeping inflation under control is likely to remain a key focus for the central bank.
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