Private enterprises are more resilient than expected! Eurozone May PMI struggles to expand
The Eurozone's PMI in May slightly decreased to 50.2, indicating weak growth in the private sector, but still above the threshold. Economists believe that the slowdown in service sector activity is the main reason, while manufacturing maintains moderate growth. The European Central Bank is expected to continue cutting interest rates in response to trade uncertainties and economic slowdown, with the market widely anticipating a drop to 2% this week. Inflation has eased, with consumer prices rising by 1.9% in May
According to the Zhitong Finance APP, the Eurozone's private sector experienced slight growth in May, demonstrating a resilience against the uncertainties caused by the erratic trade policies of the United States that exceeded initial estimates. Data released on Wednesday showed that the Eurozone's composite PMI final value fell from 50.4 in April to 50.2 in May, but still remained slightly above the 50 mark that separates expansion from contraction. The preliminary index was 49.5.
Slight growth in the Eurozone's private sector in May
Cyrus de la Rubia, an economist at Hamburg Commercial Bank, stated that the slowdown in growth was due to a slight decline in service sector activity, while manufacturing output maintained the same moderate growth as the previous month.
He noted in a statement, "We believe that further interest rate cuts by the European Central Bank and fiscal stimulus (especially in Germany) will be sufficient to offset the negative impacts of rising tariffs and increasing uncertainty, supporting economic development in the second half of the year."
Institutions such as the International Monetary Fund predict that the Eurozone's economic growth will not exceed 1% in 2025—this performance has prompted the European Central Bank to continue lowering interest rates. The market widely expects the bank to implement its eighth rate cut this Thursday, reducing the deposit rate to 2%.
Due to President Trump's criticism of free trade, which has brought significant uncertainty, EU policymakers will present alternative economic scenarios in their quarterly forecasts. Currently, most EU exports to the U.S. face a 10% tariff, but Trump has threatened to raise the rate to 50% in July. The EU is trying to negotiate for a more favorable resolution.
Meanwhile, inflation is receding. Data released on Tuesday showed that consumer prices rose by 1.9% in May, with significant relief in the pressure on service prices that has drawn much attention.
PMI data is closely watched by the market due to its early release and ability to reveal economic trends and turning points. As an indicator measuring the breadth rather than the depth of output changes, business surveys can sometimes be difficult to directly correlate with quarterly GDP data
