Eurozone Sentix Investor Confidence rose from -5.9 to -3.6 in May, above expectation of -4.8. This marks the seventh consecutive increase and the highest level since February 2022. Additionally, Current Situation Index climbed from -16.3 to -14.3, marking seven consecutive increases and reaching its highest point since May 2023. Expectations Index also saw growth, rising from 5.0 to 7.8, marking eight consecutive increases and reaching its highest level since February 2022.

Sentix noted that while the data presents an encouraging picture, indicating a gradual recovery from the economic challenges of the past two years, underlying weaknesses in momentum persist. The rise in expectations, though positive, is described as “very sluggish” and has yet to substantially impact the situation values.

As for ECB, Sentix said the window for cutting interest rate “does not appear to be very large”. Despite improvements in the economy, a deteriorating inflation environment adds pressure to bond markets.

Full Eurozone Sentix release here.

Eurozone’s PMI services index was finalized at to 53.3 in April, marking a notable improvement from March’s 51.5. PMI Composite was finalized at 51.7, up from the previous month’s 50.3 Both reached the highest levels in 11 months.

Notable country-level performances on PMI Composite include Spain reaching a 12-month high at 55.7, Germany achieving a 10-month high at 50.6, and France hitting an 11-month high at 50.5. However, Italy recorded a two-month low at 52.6, and Ireland saw a six-month low at 50.4.

Chief Economist at Hamburg Commercial Bank, Cyrus de la Rubia, highlighted the positive momentum, noting that service providers have witnessed growth for the third consecutive month, signaling an end to the lackluster performance observed in the latter half of the previous year. He emphasized the uptick in employment, new business, and order book growth, which reached its strongest expansion in eleven months.

However, concerns regarding operating costs persist, with PMI index for operating costs in the service sector continuing to rise rapidly over the past year. De la Rubia cautioned that ECB is likely to adopt a cautious approach regarding potential rate cuts, given this trend. Despite this, service companies have managed to offset some of the cost increases by passing them on to consumers, reflecting improving demand conditions.

Full Eurozone PMI services final release here.

Eurozone’s manufacturing sector remains entrenched in recession as April’s PMI figures highlight ongoing challenges and disparities within the region. The overall Manufacturing PMI for the Eurozone was finalized at 45.7, a slight decrease from March’s 46.1.

Among the member states, Greece led with a PMI of 55.2, though it marked a three-month low for the country. Spain and the Netherlands exhibited positive trends, with Spain reaching a 22-month high at 52.2 and the Netherlands achieving a 20-month high at 51.3. Conversely, major economies like Germany, France, and Italy continued to struggle. Germany’s PMI slightly improved to a two-month high of 42.5, and France’s was a three-month low at 45.3, despite a slight uptick from the flash estimate.

Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, noted the manufacturing sector is prolonging its drawn-out recession into April.” He highlighted the significant downturn in new orders, which he described as “a rapid decline unmatched in speed over the past four months and devoid of international support.” De la Rubia also pointed out the concerning trends in the capital goods sector, which is usually a bellwether for broader industrial health but has been “hit particularly hard” in the current cycle.

Spain stands out as an anomaly within the Eurozone, continuing to demonstrate economic resilience with sustained growth in its manufacturing sector. This divergence is notable, especially against the backdrop of more subdued economic performances in other major Eurozone economies like Germany, France, and Italy, which have failed to gain similar momentum.

Full Eurozone PMI manufacturing final release here.