PMIs See Downside Surprises as Growth Slows Further

Tuesday's round of flash PMI readings for May saw downside surprises across the board, except for German manufacturing.

• Services softened in France (-0.5 points), Germany (-1.3 points), the Eurozone (-1.4 points) and the UK (-7.1 points), the latter being a substantial 5.2-points below forecasts.
• Eurozone services were reported as strong, with job gains the strongest in 15 years. Expectations continued to deteriorate, despite a strong post-lockdown tailwind continuing to aid service growth.
• The UK highlighted a sharp slowing in activity growth on the back of inflationary pressures and economic and geopolitical uncertainty sapping consumer demand. Business optimism fell to a 2-year low.
• Manufacturing contracted in France (-1.2 points), the Eurozone (-1.1 points), the UK (-1.2 points). A 0.1 uptick for German manufacturing highlighted the surprising robustness of the industry as new business continued to expand.
• Order book inflows fell, dampening Eurozone manufacturing.
• Supply chain disruptions and inflationary pressures made acute by the Ukraine war continue to exert substantial pressure on manufacturing industries.
• All readings remained in expansive territory, above the 50-point breakeven mark.
• The eurozone saw a second month of easing input costs, although prices charged continued to grow at near all-time highs.