Eurozone Private Sector Recovery Gains Strength On New Orders

(RTTNews) - The euro area private sector activity grew at the fastest pace in a year in May on bigger increases in new orders, employment and an improvement in business confidence, flash survey data from S&P Global showed on Thursday.

The flash composite output index posted 52.3 in May, up from 51.7 in the previous month. The score was also above economists' forecast of 52.0.

The score suggested that the activity growth accelerated for the second straight month to post the fastest expansion in a year. The overall expansion was driven by the service sector but the pace of growth was unchanged since April.

The services Purchasing Managers' Index held steady at 53.3 in May but was below the expected reading of 53.6.

Although the manufacturing activity remained in the negative territory for 14th straight month, the PMI rose to a 15-month high of 47.4 from 45.7 in the previous month. The score was seen at 46.2.

Overall new order growth strengthened in May on solid expansion in the service sector, where the increase reached a 13-month high. Meanwhile, manufacturing new business continued to fall. In response to new order growth, employment increased at the most marked pace since last June. In line with the output and new orders conditions, the rise in staffing was centered on the services sector. Firms continued to scale back their purchasing activity. Stocks of both purchases and finished goods were reduced and suppliers' delivery times continued to shorten. On the price front, the survey showed that both input and output price inflation eased in May, but each case remained above the pre-pandemic average.

Companies were more optimistic about the future business activity with confidence hitting the highest since February 2022.

Considering the PMI numbers, the Eurozone will probably grow at a rate of 0.3 percent during the second quarter, putting aside the specter of recession, said Hamburg Commercial Bank Chief Economist Cyrus de la Rubia.

Among big two economies of the currency bloc, Germany's private sector grew the most in a year, while France slid into the contraction zone.

Germany's private sector expanded at the fastest pace in a year in May on strengthening services activity. The flash HCOB composite output index rose more-than-expected to 52.2 in May from 50.6 in April. The expected score was 51.0.

Growth continued to be driven by the service sector. Moreover, the drag from the manufacturing sector eased notably mid-way through the second quarter, the survey showed.

The services PMI registered an 11-month high of 53.9, rising from 53.2 in April, and stayed above economists' forecast of 53.5.

At the same time, the manufacturing PMI advanced to 45.4 from 42.5 in the prior month. The reading was seen at 43.4.

France's private sector unexpectedly contracted in May after returning to growth in the previous month. The headline HCOB flash composite output index dropped to 49.1 in May from 50.5 in April. The reading was forecast to climb to 51.0.

The services PMI posted 49.4 in May, down from 51.3 in April and economists' forecast of 51.8.

Meanwhile, the manufacturing PMI rose to a three-month high of 46.7 from 45.3 in the previous month. The reading was also above forecast of 45.8.