Services Firms Pass On Input Cost Rises To Protect Margins

The May final services PMIs saw a 0.3pp upward revision in Germany to 54.2, while France (49.3) and the Eurozone as a whole (53.2) saw 0.1pp downward revisions.

• While Spanish and Italian respondents reported strong export growth in May, the German PMI noted a “a first – albeit marginal – increase in new business from abroad for 12 months” while France registered a “a sharp and accelerated reduction in non-domestic client demand”.
• However, the continued recovery in overall services demand meant employment growth was positive across the four major economies.
• Although inflation pressures softened across the region, the German and French PMIs joined peripheral counterparts in noting that services companies looked to pass on higher input costs to customers to protect margins.
• Overall, the Eurozone composite PMI was in expansionary territory for the third consecutive month, with “stronger demand conditions” supporting the region’s continued economic recovery into Q2.