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Eurozone business activity growth misses expectations in May

Business activity growth in the eurozone remained subdued in May amid sluggish demand and deteriorating manufacturing output, data from IHS Markit showed.

The flash eurozone PMI Composite Output Index increased marginally to 51.6 in May from 51.5 in April, trailing the Econoday consensus estimate of 51.7. A reading above 50 indicates expansion, and below that indicates contraction.

New orders and new exports both fell for an eighth straight month. Backlogs continued to fall due to lack of new business, while the rate of job creation dropped to the joint lowest since 2016.

Within the bloc, business activity in Germany improved slightly in May due to growth in the services sector and a softer fall in manufacturing output. The PMI Composite Output Index ticked up to 52.4 from 52.2 in April. The Econoday consensus estimated the index to decline to 52.1.

For similar reasons, France also recorded growth in the private sector. The flash Composite Output Index rose to a six-month high of 51.3 in May from 50.1 in April, surpassing the Econoday consensus estimate of 50.5.

IHS Markit's flash Eurozone Services PMI Activity Index ticked down to 52.5 in May, a four-month low, from 52.8 in April.

Meanwhile, growth expectations for the coming year dropped to the lowest since October 2014 in the eurozone, with expectations in Germany falling to a 55-month low. The degree of optimism among French businesses eased sharply.

"The eurozone economy remained becalmed in the doldrums in May, adding to signs that only modest growth will be achieved in the second quarter," said Chris Williamson, chief business economist at IHS Markit. "A renewed deterioration in optimism about the year ahead suggests that the business situation could deteriorate further in coming months."