Eurozone May flash services PMI 48.9 vs 50.3 expected

• Prior 50.1
• Manufacturing PMI 49.4 vs 49.3 expected
• Prior 49.0
• Composite PMI 49.5 vs 50.7 expected
• Prior 50.4

Key findings:

• HCOB Flash Eurozone Composite PMI Output Index at 6-month low.
• HCOB Flash Eurozone Services PMI Business Activity Index at 16-month low.
• HCOB Flash Eurozone Manufacturing PMI Output Index at Unchanged pace of growth.
• HCOB Flash Eurozone Manufacturing PMI at 33-month high.

Comment:

Commenting on the flash PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“The eurozone economy just cannot seem to find its footing. Since January, the overall PMI has shown only the slightest hint
of growth and in May, the private sector actually slipped into contraction. Do not blame US tariffs for this one. In fact, efforts
to get ahead of those tariffs might partly explain why manufacturing has held up a bit better lately. Manufacturers have now
increased production for the third straight month, and for the first time since April 2022, new orders did not decline. On the
flip side, service providers, who are generally less exposed to US trade policy, except in areas like international logistics, are
seeing business activity shrink for the first time since November 2024. While foreign demand for services is softening, it is
the sluggish domestic demand that seems to be dragging the sector down.

“May’s snapshot is not pretty. Looking ahead, companies are only cautiously optimistic. The expectations index is still well
below its long-term average. However, there are reasons for confidence in the longer term. The recovery in manufacturing is
broad-based, with encouraging signs coming out of both Germany and France. Further interest rate cuts could provide a
boost, and lower oil prices compared to last year are also helping. Germany, in particular, might be gearing up to reclaim its
role as the eurozone’s economic engine, thanks to a potentially very expansionary fiscal policy. That is backed up by a
notable jump in Germany’s future production index, which has climbed to an above-average level.

“For the European Central Bank, these numbers are likely to leave it with mixed feelings. Inflation in service sector sales
prices has ticked down slightly from an already low level, but input costs are still rising and even picking up speed. With
energy prices falling, higher wages are probably the main driver here. Still, the ECB seems inclined to continue with cautious
rate cuts, especially with purchase prices in manufacturing on the decline.”