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21 May 2015
Eurozone PMI weakens, but price pressures and hiring increase - ING
FXStreet (Barcelona) - Reviewing the Eurozone May PMI releases, Teunis Brosens of ING, views that the below consensus print at 53.4 doesn’t alter the optimistic outlook on the economy.
Key Quotes
“The run of slightly disappointing Eurozone economic data continues today. The May flash composite PMI undershot consensus, falling to 53.4 from 53.9 last month according to flash estimates.”
“The services sector was responsible for the weakening, with the PMI slipping to 53.3 from 54.1.”
“The manufacturing PMI, which has been lagging for a year, narrowed the gap in May, increasing to 52.3 from 52.0.”
“Digging a bit deeper, today’s PMI report isn’t all bad. The May Eurozone composite PMI is still above the 2015Q1 average, suggesting that any growth slowdown in 2015Q2 will be muted. Moreover, Eurozone businesses are hiring staff at the fastest rate in four years. With Eurozone unemployment still at 11.3%, that is excellent news.”
“Moreover, higher import costs, more expensive oil and increasing wages are also pushing up input prices for businesses. While this may not be good news for the entrepreneurs concerned, it is actually good news from a macroeconomic viewpoint. Especially rising wages indicate that deflationary threats are receding.”
“All in all, we remain optimistic on the Eurozone recovery. Despite recent increases, oil and the euro remain substantially cheaper than a year ago. Eurozone PMIs remain well above 50, indicating continuing expansion. Moreover, capacity utilisation rates are around their long-term average and on a rising trend. Business investment should therefore start to pick up this year, helped by low rates and better financing conditions created by the ECB’s QE.”
“All in all, while tailwinds have diminished, we still expect the Eurozone to be able to attain 1.5% growth this year.”
Key Quotes
“The run of slightly disappointing Eurozone economic data continues today. The May flash composite PMI undershot consensus, falling to 53.4 from 53.9 last month according to flash estimates.”
“The services sector was responsible for the weakening, with the PMI slipping to 53.3 from 54.1.”
“The manufacturing PMI, which has been lagging for a year, narrowed the gap in May, increasing to 52.3 from 52.0.”
“Digging a bit deeper, today’s PMI report isn’t all bad. The May Eurozone composite PMI is still above the 2015Q1 average, suggesting that any growth slowdown in 2015Q2 will be muted. Moreover, Eurozone businesses are hiring staff at the fastest rate in four years. With Eurozone unemployment still at 11.3%, that is excellent news.”
“Moreover, higher import costs, more expensive oil and increasing wages are also pushing up input prices for businesses. While this may not be good news for the entrepreneurs concerned, it is actually good news from a macroeconomic viewpoint. Especially rising wages indicate that deflationary threats are receding.”
“All in all, we remain optimistic on the Eurozone recovery. Despite recent increases, oil and the euro remain substantially cheaper than a year ago. Eurozone PMIs remain well above 50, indicating continuing expansion. Moreover, capacity utilisation rates are around their long-term average and on a rising trend. Business investment should therefore start to pick up this year, helped by low rates and better financing conditions created by the ECB’s QE.”
“All in all, while tailwinds have diminished, we still expect the Eurozone to be able to attain 1.5% growth this year.”