Good News for the Service Industries in the Euro Zone from the May PMI Surveys

Like the NTC Economics Ltd. surveys of the intentions of purchasing managers in the manufacturing industries, that Carol Stone commented on last week, theMay survey of purchasing managers in the service industries is another sign of more growth to come in the Euro Zone despite rising oil prices and a strong euro.Growth has been stronger in the service industries than in the manufacturing as can be seen in the first chart.

For the Euro Zone, as a whole, the index rose to 58.69 in May from 58.33 in April. This is the highest value since November, 2003. (A value over 50 indicates expansion, one under 50, contraction.) PMI's are not available for all the individual members of the Euro Zone. For the service industries, only data for France, Germany, Ireland, Italy and Spain are available. Although the over-all index for the Euro Zone increased in May, the indexes for Spain and Germany fell. Some of the variations in purchasing managers intentions over the past year can be seen in the second chart. The intentions of purchasing managers in Italy have increased steadily and sharply over the past year while those in Spain have increased at slower rate and have had a more erratic path.

In addition to the purchasing managers intentions, NTC Economics also publishes monthly GDP Indicators for selected countries and areas. These indicators are based on the data collected in the surveys of the intentions of the purchasing managers in the manufacturing, service and construction industries. In the latest surveys, the indicators point to a 2.9% year-over-year growth for the Euro Zone. This indicator has been a fairly good predictor of GDP growth as can be seen in the third chart.