BENGALURU (Reuters) – Euro zone business activity expanded at its fastest rate in a year in May, a private survey showed, as growth in the bloc’s main services sector outpaced a contraction in manufacturing and also suggested price pressures were easing.
The currency union’s HCOB Composite Purchasing Managers’ Index (PMI), compiled by S&P Global and seen as a good gauge of the overall health of the economy, rose to 52.2 in May from 51.7 in April, its highest level since May 2023.
Although it was slightly below the provisional forecast of 52.3, it remained above the 50 mark that separates growth from contraction for the third consecutive month.
“The fear of a recession has disappeared. This is thanks to the services sector, which has recently seen a growing recovery,” said Cyrus de la Rubia, chief economist at Hamburg Merchant Bank. “Overall, the services sector is likely to ensure that the euro area will once again show positive growth in the second quarter.”
The services PMI fell slightly to 53.2 last month from an 11-month high of 53.3 in April, just below the preliminary reading of 53.3.
A sister survey released Monday suggested a long period of sluggish manufacturing activity may be turning around, with an index measuring manufacturing activity rising to 47.3 in May from 45.7 in April.
Improving overall demand has boosted optimism for the year ahead: the composite future production index rose to 63.1 in May, the highest level since February 2022.
The brightening outlook has led services companies to add staff at their fastest pace in 11 months.
Meanwhile, overall price pressures eased as producer price inflation fell to the lowest in six months, which may come as a relief to the European Central Bank, which is widely expected to cut interest rates by 25 basis points on Thursday.
“The decline in inflationary pressures is evident in both costs and selling prices,” de la Rubia added.
“But the PMI price index is still not all that great, as it is unusually high in a fairly weak economic environment.”
(Reporting by Indradip Ghosh and Christina Fincher Editing by
