The Eurozone economy lost growth momentum for a second successive month in May on weak German performance, but firms took extra staff at the fastest rate in four years.
The composite output index dropped to 53.4 in May from 53.9 in April, flash survey data from Markit Economics showed Thursday. The reading was expected to remain unchanged at 53.9.
The average score for the second quarter so far points to GDP growth similar to the 0.4 percent expansion seen in the first three months of the year, Chris Williamson, chief economist at Markit said.
This suggests that the region is on course to expand by around 2 percent this year, which would be the best performance since 2010, he noted.
Faster expansion in manufacturing was offset by a slowdown in services, although the pace in services merely eased slightly further from March’s eight-month high. The survey indicates that growth could soften in June.
The flash manufacturing Purchasing Managers’ Index rose unexpectedly to a 13-month high of 52.3 in May from 52 in the prior month. It was forecast to fall to 51.8.
Meanwhile, the services PMI dropped more-than-expected to 53.3 from 54.1 a month ago. The expected score was 53.9.
However, the survey revealed that the rate of expansion remained sufficiently robust to encourage firms to take on extra staff at the fastest rate for four years. Moreover, signaling that deflationary pressures are receding, price indices hit three-year highs.
According to Jonathan Loynes, chief European economist at Capital Economics, the survey provides another warning that growth in the currency bloc is likely to remain sluggish, keeping inflation pressures subdued.
He said the results of the survey underline the need for the European Central Bank to complete its quantitative easing programme in full or, indeed, extend it.
Another report revealed that the German private sector grew at the slowest pace in five months in May as both manufacturers and service providers reported slower activity growth, which some respondents attributed to relatively weak demand and rising cost pressures.
The flash composite PMI fell to 52.8 in May from 54.1 in April. Despite signaling an expansion, the rate of growth was the weakest in 2015 so far.
The services PMI dropped to 52.9 from 54 in April. It was forecast to fall marginally to 53.9. Similarly, the manufacturing PMI declined to 51.4 from 52.1 a month ago and it was below the expected reading of 52.
Elsewhere, the French private sector expanded at a moderate pace in May. The flash composite output index rose to 51 in May from 50.6 in April. The private sector output grew for the fourth consecutive month in May.
Growth in France was centered on the service sector, where activity rose for the fourth straight month. Meanwhile, manufacturers registered a further decrease in output, albeit the slowest since January.
The services PMI rose to 51.6 from 51.4 in April, but slightly below the expected reading of 51.9.
At the same time, the manufacturing PMI came in at 49.3, up from 48 in April and exceeded the forecast of 48.5. Nonetheless, a reading below 50 indicates contraction in the sector.
The material has been provided by InstaForex Company – www.instaforex.com