Eurozone May flash services PMI 56.3 vs 57.5 expected

• Prior 57.7
• Manufacturing PMI 54.4 vs 54.9 expected
• Prior 55.5
• Composite PMI 54.9 vs 55.3 expected
• Prior 55.8

The services and composite readings slump to a 2-month low while the manufacturing sector reading fell to an 18-month low as overall activity eased in the euro area amid headwinds associated with the Russia-Ukraine conflict, supply constraints and the rising cost of living.

Growth conditions remain robust thanks to the services sector but the outlook remains rather cloudy so there will be more challenging times in the months ahead. Meanwhile, prices charged for goods and services rose at the second-highest rate yet recorded by the survey - suggesting that inflation Inflation Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is m Read this Term pressures are still elevated. S&P Global notes that:

“The eurozone economy retained encouragingly resilient growth in May, as a beleaguered manufacturing sector was offset by a buoyant service sector. Although factories continue to report widespread supply constraints and diminished demand for goods amid elevated price pressures, the economy is being boosted by pent-up demand for services as pandemic-related restrictions are wound down. May saw a further surge in spending on tourism and recreation in particular.

“Thanks to buoyant demand for services, particularly from households, the PMI data are consistent with the economy growing at a solid quarterly rate of 0.6% so far in the second quarter. However, it remains to be seen how long this service sector rebound can persist for, especially given the rising cost of living, and the weakness of manufacturing remains a concern, as the factory malaise is already showing signs of spilling over to some parts of the services economy.

“Although there are signs that inflationary pressures could be peaking, with input cost inflation down for a second successive month and supply constraints starting to be less widely reported, inflationary pressures remain elevated at previously unprecedented levels. “Such high price pressures, accompanied by the reassuringly resilient GDP growth signalled by the surveys, looks set to tilt policymakers at the ECB towards a more hawkish stance."