Eurozone economic recovery gathers pace in May

The economic recovery in the eurozone gathered pace in May, according to preliminary figures released on Thursday.

The HCOB flash eurozone composite PMI output index rose to 52.3 from 51.7 in April, marking the third month in a row that business activity expanded. A reading above 50.0 signals expansion, while a reading below indicates contraction. Analysts were expecting a reading of 52.0.

The overall expansion was again driven by the service sector, where activity was up for the fourth month in a row. The pace of growth was unchanged on that seen in April.

Meanwhile, manufacturing production continued to fall, extending the current sequence of decline to 14 months.

The survey also showed that new orders rose at the fastest pace in more than year.

Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said: "This looks as good as it could be. The PMI composite for May indicates growth for three months straight and that the eurozone’s economy is gathering further strength. Encouragingly, new orders are growing at a healthy rate while the companies’ confidence is reflected by a steady hiring pace.

"This time, there is also some good news for the European Central Bank (ECB) as the rates of inflation for input and output prices in the services sector has softened compared to the month before. This will be supportive for the apparent stance of the ECB to cut rates at the meeting on June 6. However, the better inflation outlook will be most probably not be enough for the central bank to announce that further rate cuts will follow suit."