Overall, sentiment among European purchasing managers has brightened slightly in May. That said, the Composite Index rose only marginally by 51.5 to 51.6 index points, while the figure for the overall situation in manufacturing did not improve and remained under the neutral mark of 50 index points. It was only a slight increase in the production components that enabled the Composite Index to edge up, since the service providers were forced to report a slight dip. Purchasing manager sentiment was squeezed by a further overall decrease in export business. All in all, on the basis of these survey results the upturn should persist in Euroland; however, it hardly looks like the growth rate for the second quarter will manage to match the 0.4% posted in the first quarter.
The increasing discrepancy between Germany and France is striking. The German economic model, which is geared to industrial production and exports, is coming up against its limits in the current setting. By contrast, the French model, with its focus on the domestic market, is at present looking relatively robust compared to the escalating trade dispute between the USA and China. If this trend continues, then France will also be unable to avoid the impact of the conflict in the medium term.
Sentiment among German purchasing managers was restrained according to the flash results published. The Composite Index for Germany edged up from 52.2 in April to 52.4 index points in May. However, the overall situation has not really improved at all. Industrial output fell less strongly than before, but the purchasing managers polled did not really rate the overall situation in the service sector and in manufacturing as really any better. Once again, it is the component for order receipts that is a cause for concern. In other words, in the middle of Q2 2019 the weakness in the industrial sector has not yet been overcome.
In France, the Composite Index rose in May from 50.1 to 51.3 index points. The highest figure in six months suggests that the country’s macroeconomic performance has picked up slightly, while at the sector level, both the index for service providers and that for manufacturing have improved a tick or two, with both figures back above the 50 points mark. Unlike the rest of Euroland, order receipts contributed to the improvement, rising in the service sector and only falling slightly in manufacturing. The improvement in orders also made sure that the purchasing managers polled continued to report growing intentions to hire more staff.