A handful of the major economies around the world have released their Flash (that is, preliminary) PMI reports, which are reliable indicators of GDP growth.
Markit economist Chris Williamson was able to sum up the Eurozone story with one sentence: “Of greatest concern is France, living up to its moniker of ‘sick man of Europe’ by sliding back into contraction as Germany continues to enjoy robust growth and the rest of the region experiences its best expansion since mid-2007.”
The Eurozone’s recovery continues to be a very uneven one with Germany driving most of the gains as the rest of the region struggles.
Germany reported that its composite output index rested comfortably a 56.1 in May, which was a bit higher than the 56.0 expected by economists. Germany’s services index jumped to a 35-month high of 56.4. Markit economist Oliver Koldseike noted that the pace of job creation was at its highest level since late-2011.
Any reading above 50 signals growth.
France, however, unexpectedly signaled that its economy may be contracting. Its composite output index tumbled to a 3-month low of 49.3 in May, which was much worse than the 50.5 expected by economists. The services and manufacturing sub indices fell to multi-month lows.
“France’s stuttering economic performance continued in May, with output sliding back into contraction following modest increases in the previous two months,” said Markit’s Jack Kennedy.
The local story is disconcerting, but the overall big picture remains encouraging.
The Eurozone saw its PMI composite output index slip to 53.9 in May from 54.0 in April.
“A slight easing in the euro area‟s rate of growth was seen in May but doesn‟t change the picture of a region that‟s enjoying its best spell of growth for three years, especially when an acceleration in growth of new orders suggests that the pace of expansion could pick up again in June,” said Williamson.
Here’s Pantheon Macroeconomics’ Claus Vistesen: “The most positive news from the point of view of the economy is that the headline eurozone PMI report is now suggestive of broad-based employment gains in both the manufacturing and services sector. Much more is needed to make a meaningful impact of still high unemployment, but it is a good start. The optimism is also slightly dented by the fact that end demand is still reported as being weak relative to history. This means that higher sales, to some extent at least, are achieved by discounting prices.”
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