Eurozone Flash PMIs: What to Expect from May’s Data

Initial purchasing managers’ indexes will be released on Thursday, giving an insight into the health of the eurozone economy

Sara Silano 21 May, 2024 | 10:19AM
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European Central Bank

Financial markets are awaiting the “flash” estimates for purchasing managers’ indexes (PMIs) in the eurozone on May 23. They are initial estimates for the current month that are subject to revision and are expected to show that the region's economy is still expanding.

In the eurozone, the HCOB Flash Eurozone PMI, released by S&P Global on Thursday, will provide an updated snapshot of the health of the economy, after a good start in the second quarter. According to FactSet, the consensus estimate for May’s composite index is 52 points, above the line that marks expansion from contraction, and above April's revised figure of 51.7.

Expectations are higher for the services PMI index (53.5), showing an expansion in May and marginally higher than April's index of 53.3. Meanwhile the manufacturing index is forecast to show a ongoing contraction in activity.

Analysts at investment bank Goldman Sachs are more cautious. “We expect the upcoming euro area flash PMIs to decline slightly but remain in expansionary territory. Specifically, we expect the composite flash PMI to decrease by 0.2 points to 51.5, below consensus expectations of 52.0, driven by France, and a deceleration in the services sector,” they said in a note on May 17.

Will the ECB Cut Rates in June? Or Wait?

The European Central Bank (ECB) monetary policy meeting will take place on June 6, and not only economists, but also some ECB officials anticipate a first interest rate cut then. But some analysts have become more cautious about possible cuts after June.

Commenting on the April’s PMI data, Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said: “Service providers have now expanded their activity for the third consecutive month, putting an end to the lack of dynamism observed in the second half of last year." 

“Productivity poses a significant challenge for the services industry and the ECB. Since early 2021, service providers have consistently expanded their staff […] This trend suggests that companies, faced with staff turnover, may need to hire multiple individuals to maintain the same level of output, indicating reduced productivity.

"Meanwhile, the PMI index for operating costs in the service sector, which largely comprises unit labour costs, has continued to increase at a rapid pace over the past twelve months, following a sharp uptick in 2022. The ECB is cognizant of this trend and is likely to proceed cautiously with regards to the extent of rate cuts.”

Is Eurozone Inflation Coming Back?

The April PMI survey also showed that inflationary pressures intensified across the euro area, because of the increases in both input and output costs. According to investment bank Nomura, “core service inflation is still stickier than desired” and this factor “warrants caution and underscores a more gradual cutting cycle from the ECB”.

In a recent report of May 17, Nomura changed its view and removed its expectations of a 25 basis point cut in July this year.

“With stronger activity data, resilient demand, an encouraging labour market, stronger than-expected wage growth, and still sticky services inflation, we believe the ECB will want to cut more gradually than we had originally assumed in order to maintain some level of monetary restrictiveness,” said Andrzej Szczepaniak, economist at Nomura.

“We expect 25bp [cuts] in June, September, and December this year, as well as in March, June, and September next year,” he said. 

Why PMI Indexes Are Important for Investors?

PMI indices are a key indicator for investors to understand market sentiment and thus what the future direction of stock markets might be. They’re what economists call a “leading indicator”.

They have the advantage of being based on real data collected among purchasing managers of hundreds of companies. They refer to orders, inventories, prices and employment, giving a concrete picture of the health of a sector.



Eurozone Inflation

... April's Data Analysed


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Sara Silano

Sara Silano  is Editorial Manager for Morningstar Italy

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