May 23, 2017 / 8:08 AM / 4 months ago

Euro zone business kept up fast pace in May - PMI

LONDON, May 23 (Reuters) - Businesses across the euro zone maintained April’s blistering growth rate this month as firms struggled to meet growing demand, suggesting the bloc’s economic momentum is being sustained, a survey showed.

IHS Markit’s Flash Composite Purchasing Managers’ Index for May, seen as a good guide to growth, matched the previous month’s 56.8, its highest since April 2011. A reading above 50 indicates growth.

That confounded the median expectation in a Reuters poll for a dip to 56.6.

“It’s a very good result and it’s broad based. We’ve got a good pace of growth here. The fact we have maintained this high level in May is great news for second quarter GDP,” said Chris Williamson, chief business economist at IHS Markit.

Williamson said the PMI pointed to second quarter GDP growth of 0.7 percent, much faster than the 0.4 percent predicted in a Reuters poll last week. Official flash data said the bloc’s economy grew 0.5 percent in the first quarter.

Buoyant demand meant firms built up backlogs of work at the second fastest rate in over six years. The sub-index rose to 53.3 from 53.0.

FILE PHOTO: A waiter serves outdoor tables at a restaurant in downtown Madrid, Spain, November 26, 2015. REUTERS/Susana Vera

Factories across the currency union had a much better May then predicted. A Reuters poll said the manufacturing PMI would fall to 56.5 but it instead climbed to 57.0 from 56.7, its highest since April 2011.

An index measuring output, which feeds into the composite PMI, rose to 58.4 from 57.9, also the highest since April 2011.

Demonstrating their confidence about the months ahead, factories increased headcount at the fastest rate in the 20-year history of the survey. The employment index was 56.2, up from April’s 55.5.

“It’s by no means suggesting you are going to see any serious slowdown from here,” Williamson said.

Growth in the bloc’s dominant service industry decelerated slightly this month, its PMI showed, dipping to 56.2 from 56.4 and missing forecasts in a Reuters poll for no change.

But last month’s final reading was the highest since April 2011 and suggesting firms expect growth to continue, the business expectations index bounced to 68.1 from 67.2, its highest since early 2011.

Editing by Toby Chopra

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