May surveys point to continued, but lower, expansion

May business surveys suggest some deceleration in economic activity, signaling aggregate GDP growth of 2% this quarter – still a solid reading.

Looking at composite PMIs, we note that the relatively large declines in Germany (-1.5 points) and France (-2.4 points) contrast with the rest of the region, where a small gain is recorded (though details of that survey, including country compositions, will only be published later this week).

Still, May surveys suggest that, despite the political situation in Italy, peripheral countries’ business sentiment improved. As to core countries, the German new export order index declined strongly (from 63.2 to 52.4) last month, possibly affected by global trade tensions.

More positively, we note that Germany’s broad IFO survey suggests some stabilization, with current activity indicators improving. Overall, we continue to expect a continuation of the expansion in the Eurozone, with risks, however, tilted to the downside, in particular in case political uncertainty in Italy prevails.

Gero Jung – Chief Economist – Mirabaud AM