- Previously 53.3
- Composite PMI 52.2 vs 52.3 provisional
- Previously 51.7
The composite index was at its highest level in 12 months, reaffirming the strength of business activity in the euro area overall. Strengthening demand conditions were the main driver of this sentiment. In addition, business confidence rose to a 27-month high and price pressures have eased this month. Nevertheless, inflation remains above its pre-pandemic average. HCOB noted:
“Fears of a recession have disappeared. This is thanks to the services sector, which has seen an increasing upward trend recently. In Germany, we can now say that the upswing is underway. Business activity in Italy remains solid and Spain has further improved from an already strong position. Only France has retreated, falling into slightly negative territory. Overall, the services sector is likely to ensure that the Eurozone will once again show positive growth in the second quarter. This is clear from the composite PMI and from our GDP Nowcast, which takes into account the PMI.
“New business in the services sector is gaining momentum: the relevant index has been rising since last November and orders have been rising for three months. This is complemented by a steady increase in employment and significantly brighter future expectations. France appears to be an outlier among the euro area's four largest countries due to its weak economic performance. However, new business is growing slightly faster than last month, bringing France more in line with other economies. We are confident that the euro area's second-largest economy will not hamper overall regional growth in the coming months.”
“The European Central Bank (ECB) is getting a tailwind from the PMI. The services sector PMI price composition indicates a slight easing of inflationary pressures, increasing the likelihood of an ECB rate cut on June 6th. The easing of inflationary pressures is evident in both costs and selling prices. This development is expected to be explicitly mentioned in ECB President Christine Lagarde's press conference, countering the unexpectedly sharp wage growth reported in the first quarter. However, the picture is still not all clear, as the PMI price index is abnormally high in a rather weak economic context.”
