Eurozone: PMI drops in May, marks second consecutive fall
May 22, 2015
On 22 May, Markit released the Eurozone’s flash composite Purchasing Managing Index. According to the index, economic growth is showing signs of losing momentum in Q2. The PMI Composite Output fell from a revised 53.9 in April (previously reported: 53.5) to 53.4 in May. The reading also undershot the 53.6 the markets had expected and marked a second consecutive drop. Despite the fall, the index continues to linger above the 50-threshold that indicates expansion in business activity within the Eurozone private sector.
Markit noted that, “faster growth in manufacturing was offset by a slowdown in services, though the pace in the latter merely eased slightly further from March’s eight-month high to suggest a broad-based upturn remains in place.” Moreover, growth in new businesses moderated for a second month in a row, suggesting, according to Markit, that, “growth could continue to soften in June.” Meanwhile, the survey also showed that deflation threats are over. Firms’ average input costs rose at the highest level since April 2012, pushed by a combination of higher oil prices and rising imports costs due to the weakening of the euro.
At a country level, Germany’s PMI fell to the lowest level so far this year, due to a deceleration both manufacturing and services. Conversely in France, the PMI rose for the fourth consecutive month, although Markit pointed out that growth in economic activity is still sluggish.
Markit concluded that, “the eurozone’s recovery lost some its vigour in May, with growth slowing slightly for a second successive month. At the moment the extent of the slowing is not a major concern, but will no doubt be causing some nail-biting at the ECB as policymakers await signs that quantitative easing is the panacea the region needs to achieve a robust and sustainable recovery. ”