Euro Area: Business activity growth decelerates but remains robust in May

Euro Area PMI May 2022

Euro Area: Business activity growth decelerates but remains robust in May

The flash Eurozone Composite Purchasing Managers’ Index (PMI), produced by S&P Global, dropped to 54.9 in May from 55.8 in April. However, the index remained comfortably above the 50 no-change threshold, signaling another sustained improvement in business conditions.

May’s decrease was led by decelerations in services and manufacturing sector activity. That said, activity in the tertiary sector remained upbeat, boosted by strong growth in tourism and recreation activities following the reopening of economies. Manufacturing output growth, on the other hand, remained subdued, weighed down by widespread supply shortages associated with the war in Ukraine and lockdowns in China.

Meanwhile, hiring remained solid in both sectors, although business expectations weakened amid concerns over the economic outlook. On the price front, input cost inflation eased but remained elevated, while output charges soared at the second-highest pace on record amid surging energy prices, higher transport costs, and intensifying wage pressures.

Assessing the Eurozone’s two largest economies, growth in business activity eased but remained strong in France while it strengthened somewhat in Germany, as manufacturing output returned to growth.

Commenting on the release, Bert Colijn, senior economist at ING, stated:

“Inflationary pressures are barely abating. […] Some early signs of improvement are unlikely to translate quickly into a fading inflation rate. Moreover, hiring intentions remain strong for now, which will add to labour shortages and subsequently to wage pressures. For the ECB, this is a hawkish signal. The growth outlook is clearly worsening, but the current impact of high inflation and the war is not yet contractionary according to the [PMI] survey.”

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest