Euro Area PMI Data Shows Robust Sector Growth Despite Manufacturing Slump, EUR/USD Flat


  • Flash Eurozone Composite Output Index at 53.3 (April: 54.1). 3-Month Low.
  • Flash Eurozone Services PMI Activity Index at 55.9 (April: 56.2). 2-Month Low.
  • Flash Eurozone Manufacturing PMI at 44.6 (April: 45.8). 36-month low.

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The seasonally adjusted HCOB Flash Eurozone PMI Composite Output Index remained in expansion territory for the fifth consecutive month despite a decline from April’s print. The data signalled the easing in the rate of growth to a 3-month low. The decrease from last month doesn’t deter from the fact that the expansion remains robust for now and the third strongest print over the past 12 months.

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Growth divergence between manufacturing and services widened further which hints at an uneven recovery. Service sector growth continues to surprise, growing at the second-fastest pace over the past year. Manufacturing, however, remains a concern as evidenced by Germany’s slump as well, with the widening gap between services relative to manufacturing the widest since 2009.

New orders into the service sector meanwhile continued to rise but there are signs of a slowdown as well. Manufacturing orders were telling, declining sharply and underperforming the service sector to an extent last seen in 2008.

Output growth meanwhile accelerated which was down to companies fulfilling orders placed in prior months. The backlogs of work built up since the Covid Pandemic fell at an increased rate particularly in the manufacturing sector as new orders remain slow.


Average prices for goods and services rose at the slowest rate in 25 months as the easing trend continued. Input costs fell for a third straight month thanks to energy prices while the service sector saw input costs rise sharply as wages and salary costs continue to weigh on prices.

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The Euro Area PMI data has been on a steady decline since its most recent peak in January. However, PMI data is unlikely to deter the European Central Bank (ECB) as markets continue to price in two more 25bps hikes by September. ECB President Lagarde herself has moved to quell any speculation of a pause with further comments expected tomorrow. Fellow ECB policymakers have been hawkish as well with certain policymakers particularly concerned about the rise in services inflation. ECB policymaker Boris Vujcic only yesterday aired his concerns that a strong tourist season in Europe could feed inflation reiterating his view that rates will need to be raised further.

The rest of this week leaves very little in terms of risk events moving forward with a host of ECB policymakers the highlight. Some volatility may materialize as ECB policymaker’s remarks are digested but any further hawkish rhetoric is unlikely to have a major impact at this stage with two further rate hikes largely priced in at this stage.


EUR/USD Daily Chart


Source: TradingView, prepared by Zain Vawda

The Initial reaction to the data saw EURUSD spike 10 pips lower before recovering to trade just above the 1.0800 level. On the daily timeframe we have continued to push lower as the US Dollar finds support in the absence of an agreement on the US debt ceiling.

We currently trade just below the 100-day MA which should provide some resistance and keep bears interested. However, the steep selloff and decline over the past two weeks does warrant a retracement of sorts which could materialize from here if we receive positive feedback on debt ceiling negotiations with a bounce toward the 1.0900 level a possibility.

Alternatively continued downside must contend with support around the 1.0747 area before the 1.0700 area comes into focus.

— Written by Zain Vawda for

Contact and follow Zain on Twitter: @zvawda

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