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Nick Kounis, head of financial markets research at ABN AMRO, points out that two bellwether business surveys – the PMIs and Germany’s Ifo – provided mixed news about the eurozone economy in May.

Key Quotes

“To start with the good news, it looks as if manufacturing and exports are bottoming out, following the sharp deterioration in momentum over the last few months. The bad news is that there are signs that the weakness in external sector is having an adverse impact on the domestic economy.”

“The eurozone composite PMI edged up to 51.6 in May from 51.5 in April, a level consistent with economy stuck in sluggish growth territory (GDP growth in the 0.1-0.2% region).   This supports our views that the acceleration in the official GDP growth data seen in Q1 is unlikely to be sustained.”

“The bad news is that the service sector PMI dropped (to 52.5 in May from 52.8 in April), while the slowdown in new business in that sector fell more noticeably (51.6 from 52.9).”

“Germany’s Ifo business climate indicator seemed to confirm these trends. The overall indicator dropped (to 97.9 from 99.2), driven by a sharp fall in current conditions, though the expectations index – a better indicator for GDP growth – stabilised. The sector breakdown showed manufacturing stable at low levels, but the services index fell to the lowest level since November 2014.”