Financial
markets
are
awaiting
the
“flash”
estimates
for
purchasing
managers’
indexes
(PMIs)
in
the
eurozone
on
May
23.
They
are
initial
estimates
for
the
current
month
that
are
subject
to
revision
and
are
expected
to
show
that
the
region’s
economy
is
still
expanding.
In
the
eurozone,
the
HCOB
Flash
Eurozone
PMI,
released
by
S&P
Global
on
Thursday,
will
provide
an
updated
snapshot
of
the
health
of
the
economy,
after
a
good
start
in
the
second
quarter.
According
to
DailyFX,
the
consensus
estimate
for
May’s
composite
index
is
52
points,
above
the
line
that
marks
expansion
from
contraction,
and
above
April’s
revised
figure
of
51.7.
Expectations
are
higher
for
the
services
PMI
index
(53.4),
showing
an
expansion
in
May
and
marginally
higher
than
April’s
index
of
53.3.
Meanwhile
the
manufacturing
index
is
forecast
to
show
a
ongoing
contraction
in
activity.
Analysts
at
investment
bank
Goldman
Sachs
are
more
cautious.
“We
expect
the
upcoming
euro
area
flash
PMIs
to
decline
slightly
but
remain
in
expansionary
territory.
Specifically,
we
expect
the
composite
flash
PMI
to
decrease
by
0.2
points
to
51.5,
below
consensus
expectations
of
52.0,
driven
by
France,
and
a
deceleration
in
the
services
sector,”
they
said
in
a
note
on
May
17.
Will
the
ECB
Cut
Rates
in
June?
Or
Wait?
The
European
Central
Bank
(ECB)
monetary
policy
meeting
will
take
place
on
June
6,
and
not
only
economists,
but
also
some
ECB
officials
anticipate
a
first
interest
rate
cut
then.
But
some
analysts
have
become
more
cautious
about
possible
cuts
after
June.
Commenting
on
the
April’s
PMI
data,
Cyrus
de
la
Rubia,
chief
economist
at
Hamburg
Commercial
Bank,
said:
“Service
providers
have
now
expanded
their
activity
for
the
third
consecutive
month,
putting
an
end
to
the
lack
of
dynamism
observed
in
the
second
half
of
last
year.”
“Productivity
poses
a
significant
challenge
for
the
services
industry
and
the
ECB.
Since
early
2021,
service
providers
have
consistently
expanded
their
staff
[…]
This
trend
suggests
that
companies,
faced
with
staff
turnover,
may
need
to
hire
multiple
individuals
to
maintain
the
same
level
of
output,
indicating
reduced
productivity.
“Meanwhile,
the
PMI
index
for
operating
costs
in
the
service
sector,
which
largely
comprises
unit
labour
costs,
has
continued
to
increase
at
a
rapid
pace
over
the
past
twelve
months,
following
a
sharp
uptick
in
2022.
The
ECB
is
cognizant
of
this
trend
and
is
likely
to
proceed
cautiously
with
regards
to
the
extent
of
rate
cuts.”
Is
Eurozone
Inflation
Coming
Back?
The
April
PMI
survey
also
showed
that
inflationary
pressures
intensified
across
the
euro
area,
because
of
the
increases
in
both
input
and
output
costs.
According
to
investment
bank
Nomura,
“core
service
inflation
is
still
stickier
than
desired”
and
this
factor
“warrants
caution
and
underscores
a
more
gradual
cutting
cycle
from
the
ECB”.
In
a
recent
report
of
May
17,
Nomura
changed
its
view
and
removed
its
expectations
of
a
25
basis
point
cut
in
July
this
year.
“With
stronger
activity
data,
resilient
demand,
an
encouraging
labour
market,
stronger
than-expected
wage
growth,
and
still
sticky
services
inflation,
we
believe
the
ECB
will
want
to
cut
more
gradually
than
we
had
originally
assumed
in
order
to
maintain
some
level
of
monetary
restrictiveness,”
said
Andrzej
Szczepaniak,
economist
at
Nomura.
“We
expect
25bp
[cuts]
in
June,
September,
and
December
this
year,
as
well
as
in
March,
June,
and
September
next
year,”
he
said.
Why
PMI
Indexes
Are
Important
for
Investors?
PMI
indices
are
a
key
indicator
for
investors
to
understand
market
sentiment
and
thus
what
the
future
direction
of
stock
markets
might
be.
They’re
what
economists
call
a
“leading
indicator”.
They
have
the
advantage
of
being
based
on
real
data
collected
among
purchasing
managers
of
hundreds
of
companies.
They
refer
to
orders,
inventories,
prices
and
employment,
giving
a
concrete
picture
of
the
health
of
a
sector.
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