Euro zone business growth in May slowed as manufacturing struggled, but the dominant services industry helped shore up overall activity, according to a survey by HCOB. 

Although still above the 50 mark that separates growth from contraction, it was lower than the preliminary estimate of 53.3.

Cyrus de la Rubia, the chief economist at Hamburg Commercial Bank, expressed optimism that the eurozone would regain momentum in the second quarter. 

The services sector, which plays a crucial role in the region’s economy, experienced growth but slower, with the PMI dropping to 55.1 from April’s one-year high of 56.2. However, service demand remained strong, prompting firms to increase staffing levels, albeit more slowly.

Price pressures eased in May, as shown by the decline in the composite input and output prices indexes. 

The output index reached its lowest since April 2021, dropping to 56.4 from 56.8. While this may be welcomed by policymakers at the European Central Bank, striving to meet inflation targets, it was largely due to manufacturers reducing prices while services firms increased charges.

De la Rubia attributed the support for the services sector to a robust labor market, rising wages, and a flourishing European tourism industry. The new export business PMI, which includes tourism-related demand, remained close to its peak in May, indicating sustained strength in that sector.