- Services PMI 53.3 vs. 52.9 expected and 51.5 prior.
- Composite PMI 51.7 vs. 51.4 expeced and 50.3 prior.
Key findings:
- HCOB Eurozone Composite PMI Output Index at 51.7 (Mar: 50.3). 11-month high.
- HCOB Eurozone Services PMI Business Activity Index at 53.3 (Mar: 51.5). 11-month high.
- Service sector recovery drives growth in April, but price pressures build.
Comment:
Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:
“This looks pretty nice. 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. Encouragingly, employment has increased at a faster rate,
aligning with the uptick in new business and the growth of the order book, which has seen its strongest expansion in eleven
months. These trends suggest a growing optimism among service providers, a sentiment further bolstered by business
expectations, which are currently at much higher levels compared to the average of the past two years.
“Productivity poses a significant challenge for the services industry and the ECB. Since early 2021, service providers have
consistently expanded their staff, even during the weaker phases of 2022 and 2023. 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.
“Service companies successfully passed on a portion of the increase in operating costs, indicating improving demand
conditions. It means also that the market structure is characterized by healthy competition without being excessively
destructive.
“Spain is outpacing Germany, Italy, and France, with its Services PMI remaining several points ahead of its peer economies.
Despite political turbulences, Spain appears to be capitalizing disproportionately on tourism. Moreover, according to the IMF,
the Spanish government is less focused on austerity measures compared to other top eurozone economies, meaning less of
a break on the economy.”