The private sector recovery in the euro area is gaining strength thanks to new orders

Private sector activity in the euro area grew at its fastest pace in a year in May, driven by stronger growth in new orders, employment and improved business confidence, preliminary data from the S&P Global survey showed on Thursday.

The Flash Composite Production Index was 52.3 in May, up from 51.7 the previous month. The result was also above economists’ forecasts of 52.0.

The result suggested that activity growth accelerated for the second month in a row and was the fastest in a year. The service sector was the driving force behind the overall expansion, but the pace of growth has not changed since April.

The Purchasing Managers’ Index for Services held steady at 53.3 in May, but was below the expected reading of 53.6.

Although activity in the manufacturing sector remained negative for the 14th consecutive month, the PMI rose to a 15-month high of 47.4 from 45.7 in the previous month. The result was 46.2.

Overall, growth in new orders strengthened in May on the back of solid expansion in the services sector, where growth reached a 13-month high. Meanwhile, the number of new manufacturing enterprises continued to decline.

In response to the increase in new orders, employment increased at the fastest pace since June last year. In line with production and new order conditions, employment growth was concentrated in the services sector.

Companies continued to limit their purchasing activity. Inventories of both purchased goods and finished products were decreasing, and supplier delivery times continued to shorten.

On prices, the survey found that inflation in both input and output prices declined in May, but in each case remained above the pre-pandemic average.

Companies were more optimistic about future business activity, reaching the highest level since February 2022.

Based on PMI data, the euro zone is likely to grow at a rate of 0.3 percent in the second quarter, putting aside the specter of recession, said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

Of the currency bloc’s two big economies, Germany’s private sector posted the biggest growth in a year, while France fell into recession.

In May, the German private sector grew at its fastest pace in a year thanks to strengthening service activity. HCOB’s rapid composite production rate rose more than expected in May to 52.2 from 50.6 in April. The expected result is 51.0.

The service sector continued to be the driving force of growth. Moreover, as the study showed, the burden on the manufacturing sector significantly eased in the middle of the second quarter.

The services PMI reached an 11-month high of 53.9, up from 53.2 in April, and remained above economists’ forecasts of 53.5.

At the same time, the manufacturing PMI increased to 45.4 from 42.5 a month earlier. The reading was 43.4.

France’s private sector unexpectedly contracted in May after returning to growth the previous month. The headline HCOB flash composite production index fell to 49.1 in May from 50.5 in April. The reading was forecast to rise to 51.0.

The services PMI reached 49.4 in May, up 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 at 45.8.

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by Renju JayaRTTNews Staff Writer

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