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Financial News: Eurozone Private Sector Expands At Slowest Pace In

Eurozone Private Sector Expands At Slowest Pace In 18 Months

05/23/2018 - 08:51:00 (RTTNews)

(RTTNews) - Eurozone private sector grew at the weakest pace in one-and-a-half years in May with the rate of expansion slowing for the fourth consecutive month, flash survey data from IHS Markit showed Wednesday.

The composite output index dropped to an 18-month low of 54.1 in May from 55.1 in April. The score was forecast to remain unchanged at 55.1. Nonetheless, a reading above 50 indicates growth.

Growth deteriorated in both manufacturing and services, down to 18- and 16-month lows, respectively.

The services Purchasing Managers' Index came in at 53.9, while the score was expected to remain at 54.7.

The manufacturing PMI slid more-than-expected to 55.5 from 56.2 in April. Economists had forecast the index to drop to 56.1.

Despite at 18-month low, the survey remains at a level consistent with the Eurozone economy growing at a reasonably solid rate of just over 0.4 percent in the second quarter, Chris Williamson, chief business economist at IHS Markit, said.

In previous months, various factors such as extreme weather, strikes, illness and the timing of Easter dampened growth, while May saw reports of business being adversely affected by an unusually high number of public holidays.

"Some of the fog will hopefully lift with the June PMI data, providing a clearer signal of the underlying growth momentum," Williamson added.

Christoph Weil, an analyst at Commerzbank, said the strong appreciation of the euro will have a lasting dampening effect on economic growth. The European Central Bank is unlikely to ignore the poorer economic data for much longer.

Survey data showed that new business grew at the weakest pace since October 2016. At the same time, the rate of job creation slipped to the lowest in nine months.

The May survey also brought mixed news on prices. Input cost inflation accelerated to a three-month high, while average selling prices for goods and services gained at the slowest rate since last September.

Private sector activity in Germany slowed further in May, to a 20-month low. The composite output index dropped to 53.1 in May from 54.6 in April.

The services PMI declined to 52.1 in May from 53.0 in the previous month. Meanwhile, it was forecast to remain unchanged at 53.0.

The manufacturing PMI came in at a 15-month low of 56.8 in May versus 58.1 a month ago. The expected score for the month was 57.9.

Elsewhere, France's private sector growth slowed to a 16-month low in May. The flash composite output index fell more-than-expected to 54.5 from 56.9 in April. The score was seen at 56.8.

The moderation in overall output growth was driven by the services sector. The services PMI slid to 54.3 from 57.4 a month ago. The expected reading was 57.2.

Meanwhile, the manufacturing PMI rose unexpectedly to 55.1 in May from 53.8 a month ago. Economists had forecast the reading to fall to 53.7.

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