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Eurozone business activity growth slips to 18-month low in May

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Eurozone business activity growth slips to 18-month low in May

Growth in eurozone business activity fell to its lowest level in 18 months in May as the pace of expansion in new business weakened, IHS Markit's flash Purchasing Managers' Index data showed.

The PMI composite output index fell to 54.1 in May from 55.1 in April, notching up its fourth straight month of moderation and the index's lowest level in 1.5 years. The services PMI activity index dropped to a 16-month low of 53.9 in May from 54.7 in April, while manufacturing PMI fell to a 15-month low of 55.5 from 56.2.

The pace of increase in new business inflows slowed for a fifth straight month. Factories reported reduced new order inflows due in part to weaker export growth.

Activity in May was also disrupted by higher than usual number of public holidays, as well as shortages of raw materials and labor.

Companies continued to hire in the month, but the rate of job creation moderated in both services and manufacturing firms.

"While prior months have seen various factors such as extreme weather, strikes, illness and the timing of Easter dampen growth, May saw reports of business being adversely affected by an unusually high number of public holidays," said Chris Williamson, chief business economist at IHS Markit.

"Some of the fog will hopefully lift with the June PMI data, providing a clearer signal of the underlying growth momentum. Until then, however, it's likely that the disappointing May survey results will rekindle some concerns regarding downside risks facing the euro area economy," Williamson added.

France's flash composite output index fell to its lowest reading in 16 months at 54.5 in May from 56.9 in April as services sector growth slowed. Factories posted a sharper rise in output, bringing the flash manufacturing PMI to a three-month high of 55.1 in May from 53.8 in April.

In Germany, the flash PMI composite output index fell to a 20-month low of 53.1 in May from 54.6 in April, reflecting weaker expansion in factories and service firms.