Euro zone business kept up fast pace in May - PMI

Terrell Bush
May 24, 2017

Greek lawmakers approved a reforms package last Thursday that includes pension cuts and tax hikes as demanded by the country's creditors to pave the way for the disbursement of bailout funds totaling more than Euro 7 billion and to begin talks on debt relief.

One of the indicators the European Central Bank looks at when assessing its policy stance is the monthly survey of business activity from financial information company IHS Markit. The French numbers impressed with the services PMI, which rose to a 6-year high. The composite output index rose unexpectedly to a 73-month high of 57.3 in May from 56.7 in April.

The Nikkei Flash Manufacturing Purchasing Managers' Index, or PMI dropped to 52.0 in May from 52.7 in April.

The flash reading, released one week before the final PMI report, is based off around 85-90% of survey responses, and is generally a pretty accurate guide as to how the final figure will print.

The French services sector, which at around 79 per cent of GDP makes up a similar proportion of the economy to the United Kingdom, saw its strongest expansion in six years, although the manufacturing sector dipped slightly from recent highs. Business confidence across manufacturing and service sectors rose in May to the highest since comparable data were first available five years ago. The services sector slowed a tad to 56.2 in May from 56.4 in the previous month but remains within its best level in six years. Separately, the closely watched Ifo business climate survey climbed to 114.6, an all-time high. Expectations were for a reading of 113.1. A rush of eurozone data released Tuesday points to an economy that hasn't stopped surprising on the upside. "Business activity is expanding at its fas test rate for six years so far in the second quarter, consistent with 0.6 to 0.7 per cent GDP growth".

Data from the Office for National Statistics showed that the United Kingdom budget deficit increased in April.

"In the U.S. all eyes are on Trump's budget proposal", said Nadia Lovell, U.S. equity strategist at J.P. Morgan Private Bank in NY. Other key economic data include new home sales due today, existing home sales on Wednesday, weekly jobless claims and worldwide trade on Thursday, followed by GDP, durable goods orders and consumer sentiment on Friday.

Germany's private sector grew at the fastest pace in more than six years in May due to stronger-than-expected factory activity, a survey showed on Tuesday, suggesting Europe's biggest economy will carry its robust upswing into the second quarter. Economists had expected the measure to fall very slightly.

Other reports by TheDigitalNewspaper

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