MNI Global Morning Briefing: Europe's Services PMIs Seen Rising

Friday kicks off with the publication of UK retail sales at 0700BST, followed by the release of the flash PMIs for France (0815BST), Germany (0830BST), the EZ (0900BST), the UK (0930BST) and the US (1445BST).

UK retail sales seen rising further

Monthly retail sales are expected to post another increase in April, although at a slower pace than in March. Markets expect retail sales to rise by 4.8% in April after growing 5.4% in the previous month. Clothing sales increased sharply in March as consumers looked forward to the easing of lockdown restrictions. Moreover, other stores such as garden centres were able to increase sales markedly.

With non-essential businesses reopening in mid-April, retail sales should post another strong reading in April as suggested by MNI's reality check. Moreover, survey evidence such as the BRC shop sales monitor indicate strong sales figures in April as short-term pent-up demand draws consumers back to the stores.

Source: Office for National Statistics

Europe's services PMIs forecast to increase

The services PMIs started to pick up towards the end of Q1 and April saw Spain's, France's and the EZ's PMIs shift above the 50 mark, signalling expansion for the first time in several months. On the other hand, Italy's and Germany's indices eased slightly in April. May's flash services PMIs are all expected to post a monthly increase and all four indicators are seen above the 50-mark. Several European countries started to ease restrictions in May, which provided a boost to service sector activity and optimism. France's services PMI is projected to rise 2.7pt to 53.0, while the German index is seen back in expansion territory at 52.0 in May. Markets look for the EZ flash services PMI to tick up to 52.4, while the UK's index is anticipated to increase 1pt to 62.0.

The manufacturing PMIs continuously showed strong readings in recent months and all four indicators remain comfortably in expansion territory. In May, the flash manufacturing PMIs are expected to ease slightly. The French index is projected to edge down to 58.5, while the German PMI is seen marginally lower at 65.9. Markets look for the EZ PMI to tick down to 62.5, while the UK's index is forecast to drop to 60.8. April's reports again noted ongoing supply chain issues, which led to higher purchasing prices and a record selling price inflation in some countries.

US Services PMI seen unchanged

The services PMI rose to the highest level on record in April as output and new business expanded rapidly. The index now stands at 64.7 and markets expect an unchanged reading in May. April's report noted that some firms were concerned over the sustainability of the gains seen for new orders, which weighed on business confidence.

The manufacturing PMI is forecast to ease slightly in May by 0.1pt to 60.4, following April's increase to the highest level since May 2007 when the series began. Supplier delivery delays continued to push up the headline index and raw material shortages led to the highest cost burden since July 2008.

The main events to follow on Friday is the Ecofin and the Eurogroup meeting where ECB's Christine Lagarde, Andrea Enria and Luis de Guindos participate. In the US, speeches by Atlanta Fed's Raphael Bostic and San Francisco Fed's Mary Daly are worth noting.