# Euro zone business growth slowed in May as factories struggled-PMI
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-06-05
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: Euro Zone Business Growth Slowed in May as Factories Struggled
Meta Description: Euro zone business activity was shored up by services, offsetting a manufacturing decline. Overall price pressures abated. Experts predict positive growth in
URL: https://financedigest.com/euro-zone-business-growth-slowed-in-may-as-factories-struggled-pmihtml

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LONDON (Reuters) – Euro zone business activity was shored up last month by the bloc’s dominant services industry offsetting a deepening decline in the manufacturing sector, according to a survey which also showed overall price pressures had abated.

HCOB’s final Composite Purchasing Managers’ Index (PMI), compiled by S&P Global and seen as a good gauge of overall economic health, fell to a three-month low 52.8 in May from April’s 54.1.

While still comfortably above the 50 mark separating growth from contraction it was below a preliminary estimate for 53.3.

Relatively resilient services activity growth should ensure that the [euro zone](https://www.financedigest.com/uk-has-bigger-inflation-problem-than-us-or-euro-zone-boes-mann.html "UK has bigger inflation problem than US or euro zone – BoE’s Mann") regains some footing and shows a positive rate of expansion in the second quarter after GDP stagnated in the October-March period,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

A PMI covering the services sector dropped to 55.1 from April’s one-year high of 56.2, below the 55.9 flash reading. A manufacturing PMI released last week showed the downturn in factory activity deepened as demand slumped despite [prices falling](https://www.financedigest.com/world-food-prices-fall-to-two-year-low-in-may-un-food-agency.html "World food prices fall to two-year low in May – UN food agency").

Overall cost pressures were lower in May and both the composite [input and output](https://www.financedigest.com/input-outputs-ouroboros-protocol-closes-gap-to-bitcoin-2-0.html "Input Output’s “Ouroboros” Protocol Closes Gap to Bitcoin 2.0") prices indexes fell. The output index dropped to 56.4 from 56.8, its lowest since April 2021.

While that will likely be welcomed by policymakers at the European [Central Bank](https://www.financedigest.com/two-speed-economy-in-sweden-central-bank-business-survey-shows.html "Two-speed economy in Sweden, central bank business survey shows") who have yet to get inflation down to target it was largely down to factories reducing prices as services firms, closely watched by the ECB, increased their charges faster.

Despite that, demand for [services continued to rise and firms](https://www.financedigest.com/why-financial-services-firms-are-banking-on-behavioural-biometrics-to-beat-fraud.html "Why financial services firms are banking on behavioural biometrics to beat fraud") increased headcount, albeit at a slower pace. The employment index dipped to 54.6 from April’s 11-month high of 55.6.

The [services sector is being supported by the strong](https://www.financedigest.com/auriga-urges-banks-to-exploit-strong-uk-public-support-for-their-atm-banking-services-spelled-out-in-new-industry-research.html "Auriga urges banks to exploit strong UK public support for their ATM banking services spelled out in new industry research") labour market, rising wages and a tourism sector that is flourishing throughout Europe,” said de la Rubia.

“The latter is confirmed by the new export business PMI, which includes tourism-related demand and remained near its series peak in May.”

(Reporting by Jonathan Cable; Editing by Toby Chopra)


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