The Markit Flash Purchasing Managers’ Index (PMI) for May were published this morning, containing some surprises that reversed the euro’s earlier decline.
First out was French PMI, showing an improvement in both the manufacturing and services PMI over the previous month. French Flash Manufacturing PMI remained in contraction but came in much stronger than expected at 49.3 versus estimates of 48.6. In April, the figure was 48.0. Flash Services PMI was weaker than expected at 51.6 versus estimates of 52.0 but was a slight improvement over April’s 51.4. The services sector was boosted by rising new business in the private sector but manufacturing suffered from weak domestic demand and a small increase in new export orders was not enough to offset this.
German PMI, which came out after the French data, was broadly weaker with both manufacturing and services PMI coming in below estimates. Flash Manufacturing PMI for Germany fell to 51.4 in May, against expectations it would fall to 51.9 from April’s 52.1. The Flash Services PMI showed an even bigger decline to 52.9 in May from 54.0 in April and below estimates of 53.9. Slowing new business was the main reason for the slowdown in services but rising domestic demand and construction activity helped keep services in expansion. Manufacturing continued to expand as new export orders rose for the fourth month in a row but at a slower pace.
Eurozone-wide PMI data was mixed as manufacturing activity accelerated to a 13-month high but services was weaker at a 4-month low. Flash Manufacturing PMI rose to 52.3 in May from 52.0 in April and above estimates of 51.8. But Flash Services PMI fell to 53.3 in May from April’s 54.1 and was below forecasts of 53.9. The Flash Composite index, which comprises both sectors, hit a 3-month low, indicating that Eurozone recovery slowed during May. But Eurozone periphery countries outperformed Germany and France again for the second month running. There was good news for employment as the rate of job creation was at its highest since May 2011 with both services and manufacturing jobs posting strong growth.
The PMIs are seen as a good growth indicator so the broadly softer numbers today should reinforce the ECB’s position of implementing fully its asset purchase program until growth is on a stronger footing and has spread to all sectors.
The euro was volatile after the release of the data jumping above 1.11 against the dollar on the back of the French PMI. The weak German PMI limited the euro’s advance but it still managed to hit a high of 1.1180 before settling towards 1.1160 at midday. The single currency also rose against the yen at around 135 yen but was weaker against the pound after very strong UK retail sales data pushed sterling back towards recent highs. The euro had plummeted to 0.7108 against the pound at midday.