Eurozone boom tailing off, surveys say
European economic growth is slowing further, manufacturing and services industry surveys indicated on Wednesday.
A 'flash' preliminary reading of the eurozone manufacturing purchasing managers' index fell to 55.5 for May from 56.2 in April, falling short of the 56.1 the market had expected.
The services PMI fell to 53.9 from 54.7, versus a estimate of 54.7, which meant the composite PMI fell to 54.1 from 55.1, versus an expected 55.1 after having seemed to gain some stability in April.
Earlier, the bloc's biggest economy showed indications of slowing further as Germany's composite PMI fell to a 20 month low of 53.1. The German manufacturing PMI fell to 56.8 from 58.1, versus a 57.9 forecast, while services fell to 52.1 from 53, where it was expected to remain.
France's composite PMI fell 2.4 points to 54.5, its lowest value in 16 months, driven by a sharp slowdown in the services sector that negated gains in the manufacturing sub-index.
These falls mean the chances for a bounce back in the second quarter have become very slim, said Moritz Degler at Oxford Economics, calculating that the eurozone PMI is consistent with quarterly GDP growth of 0.4-0.5%.
"The deterioration in sentiment continues to reflect concerns about the more assertive position taken by the US in trade negotiations. Perhaps, it is also the first sign of spillovers from the political situation in Italy.
"The bottom line is, GDP growth in the eurozone has slowed, perhaps by more than we had previously expected. At this point we are still comfortable with our recent downward revision of the 2018 GDP growth outlook to 2.2%, but downside risks are mounting. The persistent weakness in economic activity and rising uncertainty puts some question marks behind the ECB’s normalisation path making for a real communication challenge for the ECB in the coming months."
The euro was put under heavy pressure after the PMI prints, falling 0.5% against the dollar to 1.1720.
"Whilst certainly not entirely gloomy, the Euroboom has descended pretty quickly and the outlook is not overly positive. Add in the political risks emerging in Italy and it all looks quick tricky for the ECB as it tries to exit QE," said Neil Wilson, market analyst at Markets.com.