Private sector activity in the Eurozone showed continued expansion in May, as indicated by a preliminary report from S&P Global and the Hamburg Commercial Bank (HCOB) released on Thursday.
The composite Purchasing Managers’ Index (PMI) reached a 12-month high, standing at 52.3, up from 51.7 in April.
Manufacturing PMI jumps to 15-month high
The services sector PMI remained unchanged from April at 53.3, indicating steady growth.
However, a significant improvement was seen in the manufacturing sector, with the PMI jumping to its highest point in 15 months at 47.4, up from 45.7 in the previous month.
This uptick reflects a stronger recovery within the Eurozone’s industrial base.
Implications for the European Central Bank
Cyrus de la Rubia, Hamburg Commercial Bank’s Chief Economist, noted positive developments regarding inflation.
There is also some good news for the European Central Bank (ECB) as the rates of inflation for input and output prices in the services sector have softened compared to the month before. This will be supportive for the apparent stance of the ECB to cut rates at the meeting on June 6.
Despite the improved inflation outlook, de la Rubia cautioned against expecting additional rate cuts in the near term.
The better inflation outlook will most probably not be enough for the central bank to announce that further rate cuts will follow suit.
Economic outlook for Eurozone
As the ECB prepares for its upcoming meeting, these findings provide a nuanced backdrop for monetary policy decisions. The balance between maintaining growth and controlling inflation will remain a key focus for the central bank moving forward.
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