Euro Zone PMI Contracts In May

Euro zone’s S&P composite purchasing managers’ index (PMI) in May came down to 49.5 from 50.4 in April. A reading below 50 means contraction in activity over that in the pervious month. Composite PMI covers both services and manufacturing. This reading for May is below expectations.

Source: S&P Global

Contraction More In Services Than In Manufacturing

Contraction was more in services than in manufacturing, in the month. Services PMI in May fell to 48.9 from 50.1 in April. Manufacturing PMI increased to 49.4 in May from 49 in April. There is indication that manufacturing recovery is taking place in larger EU economies like Germany and France.

Slowdown in demand remains a challenge for the Euro zone economy. European Central Bank (ECB) is therefore cutting down interest rates to give a boost to demand. In the past one year it has cut down interest rate for seven times. Markets are expecting that it will again go for a 25-basis point rate cut in June. One basis point is 0.01%. Currently the benchmark interest rate of ECB stands at 2%.

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Source: S&P Global