LONDON: A recovery in euro zone business activity was weaker than expected this month as a deepening contraction in the bloc’s manufacturing industry is increasingly holding back services firms, a survey showed. Last month, European Central Bank President Mario Draghi raised the prospect of more support for the struggling euro zone economy if its slowdown persists and Thursday’s survey is likely to add to the concerns of policymakers.
IHS Markit’s Flash Composite Purchasing Managers’ Index (PMI), which is considered a good guide to economic health, only nudged up to 51.6 this month from a final April reading of 51.5, below the median expectation in a Reuters poll for 51.7.
“It’s not only that current growth is brittle, as the surveys suggest. There are also downside risks to the outlook going forward,” Morgan Stanley economists wrote to clients.
“We expect a dovish message at the central bank’s June meeting.”
Earlier figures from Germany showed activity contracted for a fifth consecutive month in May, reflecting the toll unresolved trade disputes are having on Europe’s largest economy.
German business morale deteriorated more than expected this month due mainly to a plunge in services sector confidence, an Ifo Institute survey showed on Thursday, also suggesting the economy is losing steam after solid growth at the start of 2019. In France, the bloc’s second-largest economy and the only other euro zone member to report a preliminary PMI, activity reached a six-month high but again trade disputes looked set to ensure growth would remain modest at best. — Reuters
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