Euro area services PMI hits three-month high in May, but confidence sours

Eurozone services expanded at a "modest" pace last month, extending the sector's growth streak to just under six years, with Germany and Spain continuing to fare best, while in Italy activity levels continued to fall.

IHS Markit's services sector Purchasing Managers' Index printed at 52.9 for May, revised data showed, reaching a three-month high.

That was up from a preliminary estimate of 52.5 and a final reading for April of 52.8.

"Modest growth of the private sector economy occurred at a time when levels of incoming new business were rising only slightly for the third month running," the survey compiler said.

However, the "solid" increase in activity allowed companies to continue reducing their overall backlogs of work for a third consecutive month and hiring levels remained "solid" as well.

Inflation on the other hand weakened to its lowest level for two-and-a-half years.

"The survey also brought further signs that companies are having to increasingly compete on price to sustain sales growth, dampening inflationary pressures to the lowest for two-and-a-half years," IHS Markit's chief business economist, Chris Williamson said.

And business confidence was undermined by uncertainty around Brexit, US-China trade and European political instability, hitting its lowest level since the beginning of 2019, with sentiment in Germany the most downbeat.

According to Williamson, the data was pointing to a quarter-on-quarter pace of euro area GDP growth of just 0.2%.

"Although Germany and France saw stronger growth in May, rates of increase remained subdued. Spain meanwhile saw growth slip to the lowest since late-2013 but Italy once again reported the toughest conditions, stuck in a mild downturn."