Eurozone economy still growing, with services PMI expanding but manufacturing still contracting

From Morningstar: 2024-05-21 06:19:00

Financial markets are awaiting the “flash” estimates for purchasing managers’ indexes (PMIs) in the eurozone on May 23. The HCOB Flash Eurozone PMI is expected to show the region’s economy is still expanding, with consensus estimates for the composite index at 52 points, indicating growth.

Analysts expect the services PMI index to show expansion in May, with a forecast of 53.5, slightly higher than April’s index. However, the manufacturing index is expected to continue showing a contraction in activity despite overall economic growth in the eurozone.

Leading up to the ECB monetary policy meeting on June 6, there are speculations about a potential interest rate cut. Some analysts anticipate a rate cut in June, while others are more cautious due to recent data on productivity and increasing operating costs in the service sector.

Inflationary pressures have intensified in the eurozone, as indicated by the PMI survey in April. Input and output costs have increased, prompting some analysts to advocate for a more gradual cutting cycle by the ECB to maintain monetary restrictiveness amid strong demand and wage growth.

PMI indexes are crucial for investors as they serve as leading indicators of market sentiment and potential stock market directions. These indices provide real data from purchasing managers across various sectors, offering insight into orders, inventories, prices, and employment levels impacting the overall health of the economy.



Read more at Morningstar: Eurozone Flash PMIs: What to Expect from May’s Data