News

• Prior 49.0
• Final Composite PMI 50.3 vs 49.4 prelim
• Prior 48.5

Key findings:

• Marginal increase in business activity
• Business optimism rebounds to a seven-month high
• New work and employment continue to decline

Comment:

Tim Moore, Economics Director at S&P Global Market
Intelligence, said:

“The service sector regained its poise in May as receding
concerns about US tariffs, recovering global financial
markets and greater confidence among clients all helped to
support output growth. Although only marginal, the upturn
in service sector activity was stronger than first estimated
in May.

“Output growth expectations for the year ahead also
rebounded after April’s tariff-related slump. Optimism
reached its highest level since October 2024, which
reflected forthcoming business investment plans alongside
hopes of a turnaround in sales pipelines and improving
domestic economic prospects.

“Prevailing demand conditions nonetheless remained
challenging in May, as signalled by a sustained reduction
in total new orders across the service economy. Survey
respondents mostly cited cutbacks to discretionary
business and consumer spending.

“Reduced workloads and pressure on margins from
increased payroll costs meant that headcounts remained
under close scrutiny. Aside from the pandemic, the current
eight-month period of falling employment numbers is the
longest streak since 2008-10.

“While rising wages were again the most commonly reported
factor pushing up input prices, the overall rate of cost
inflation eased from April’s 21-month high. Softer cost
inflation and intense competitive pressures contributed to
the slowest rise in price charged by service providers since
last October.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Tech companies are testing self-driving cars in Texas, with Elon Musk and Tesla getting set to join the growing market.

• Prior 50.1
• Composite PMI 50.2 vs 49.5 prelim
• Prior 50.4

This article was written by Justin Low at www.forexlive.com.

• Prior 49.0
• Final Composite PMI 48.5 vs 48.6 prelim
• Prior 50.1

Key findings:

• Germany Services PMI Business Activity Index at 30-month low.
• Germany Composite PMI Output Index at 5-month low.
• Rates of input cost and output price inflation ease slightly.

Comment:

Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“The service sector is no longer stabilizing the overall economy, it is slowing it down instead. Business activity declined for
the second month in a row, new business fell more sharply than in the previous month, and work from abroad was also
lower than before. However, there are many indications that this development is not sustainable, but rather attributable to
the volatility of economic activity that is observed from time to time.

“The conditions for a recovery are relatively good: real
wages have risen and are likely to continue to do so therefore driving up demand for services, lower interest rates are
helping many companies, and the new government’s expansionary fiscal policy should also have a positive impact on large
parts of the service sector.

“Service providers have significantly slowed the pace of hiring, but despite weaker new business, they are not yet prepared
to lay off staff on balance. This may be due to the usual lag with which lower activity is reflected in personnel decisions.
However, it is also quite possible that companies are proceeding with greater caution with respect to job cuts because they
are hoping for a recovery soon. This view is supported by the higher level of optimism compared with the previous month,
even though it remains lower than seen on average in the past.

“The continued sharp rise in costs is a challenge for the service sector. The rise is primarily due to wage increases, as
energy prices fell in May. Since it is apparently only possible to pass on smaller price increases to customers, service
providers’ margins are coming under pressure. An improvement in demand as a result of expansionary fiscal policy could
improve the situation here in the coming months.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Prior 47.3
• Composite PMI 49.3 vs 48.0 prelim
• Prior 47.8

The reading still marks a contraction in business activity but much less pronounced after the revision. Of note, the fall in new orders and employment were not as marked as the months before. HCOB notes that:

“The French private sector economy seems like it’s on the brink of exiting contraction. The composite HCOB PMI improved
to 49.3 in May, still below the growth threshold, but marking the highest reading so far this year. The upward trend is visible
in both manufacturing and services PMIs.

“Overall market conditions remain constrained, with both domestic and foreign demand continuing to decline, though at a
slower pace. While there are tentative signs of a recovery in market demand, optimism for improvement in the coming year
has deteriorated further, suggesting that service providers remain unsettled by ongoing uncertainty. It remains to be seen
how effective President Macron’s efforts to attract research and investment to France will be.

“Profit margins in the French service sector appear to have narrowed in May. Input cost inflation accelerated, driven in part
by wage pressures. At the same time, output prices declined, indicating that firms were unable to pass on rising costs to
customers. Competitive pressures prompted companies to lower their prices despite increasing cost burdens. The ECB
might feel supported by this price trend, leaving scope for them to cut rates again at the next meeting tomorrow. Looking
ahead, we anticipate two additional rate cuts from the ECB later this year.”

This article was written by Justin Low at www.forexlive.com.

• Prior 52.9
• Composite PMI 52.5 vs 52.1 prior

Key findings:

• Business activity rises at stronger rate, while the future outlook brightens
• New business growth softens slightly, but remains historically elevated
• Inflationary pressures intensify

Comment:

Commenting on the PMI data, Nils Müller, Junior Economist at Hamburg Commercial Bank, said:

“Italy’s service sector continued to expand in May, with the HCOB Services PMI rising to 53.2 – its highest reading in nearly
a year. The sixth consecutive month of growth was underpinned by resilient domestic demand and a steady inflow of new
business, helping to solidify the sector’s role as the main engine of Italy’s economic expansion. While the pace of new order
growth softened slightly, it remained elevated by historical standards, suggesting that the recovery is gaining traction.

“Employment growth accelerated to its strongest pace since mid-2024, as firms responded to rising workloads by hiring
additional staff – often on temporary or part-time contracts. Business confidence also improved, reaching a three-month
high, though it remained below the long-run average, reflecting lingering caution.

“At the same time, the external environment continues to cast a shadow over the sector. Export demand fell for a tenth
consecutive month, with the sharpest contraction since January. Survey respondents pointed to subdued global conditions
as a key factor dampening international sales. What will the US-EU trade negotiations bring? We don’t know yet – and until
there is clarity, ongoing trade uncertainty will remain a central theme for Italian services exporters.

“Inflationary pressures, meanwhile, showed signs of reacceleration. Input costs rose amid higher energy prices and wage
burdens, prompting firms to raise their selling prices at the fastest rate in over a year. While this may help protect margins, it
could also test the limits of consumer tolerance in the months ahead. For the ECB, which HCOB Economics expects will
lower its key interest rates once more at the upcoming June meeting, the uptick in service-sector inflation is an unwelcome
development, potentially complicating the path toward broader price stability across the eurozone.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Fed chair Jerome Powell resisted pressure from President Donald Trump recently to lower interest rates, citing employment and price stability as a priority.

U.S. tariffs are in the spotlight once again in Europe as President Donald Trump’s 50% levy on steel and aluminum imports came into effect Wednesday.