The final figure of May euro zone services PMI showed a marginal upward revision, compared with the first estimate. The headline figure was revised from 46.5 to 46.7, a slight decline compared with the April reading of 46.9. Also the composite was slightly upwardly revised, from 45.9 to 46.0, down from 46.7 in April. National data show that the French reading was marginally downwardly revised from 45.2 to 45.1 and the German reading was downwardly adjusted from 52.1 to 51.8. In Italy, services PMI increased unexpectedly, from 42.3 to 42.8, while Spanish services PMI plunged further into contraction (41.8 from 42.1). While the final reading showed a marginal upward revision compared with the first estimate, the data continued to indicate that the sector has fallen into a steepening downturn, with weakness spreading from the non-core countries to the core. For now, only the German services sector continues to grow, while the rate of contraction in France was the steepest since October last year. Cost pressures eased further in May and price discounting was reported in France, Italy and Spain. In Germany, on the contrary, pricing power was stronger, where changes rose at the quickest pace in over a year. Based on the overall reading, Markit who is responsible for the data, said it would not be surprised to see the region contract by 0.5% Q/Q in the second quarter. Markit added also that companies said activity was hit by heightened political and economic uncertainty.
After a weather-related uptick in March, euro zone retail sales fell back sharply in April. On a monthly basis, retail sales dropped by 1.0% M/M, while the consensus was looking for only a marginal decline (by 0.1% M/M). The details show that weakness was based in non-food products, while sales of food, drinks and tobacco rose by 0.3% M/M. The details for March confirm that the rebound was at least partly weather-related. In the first quarter, consumer spending held up relatively well, but this is a weak start for the second quarter, suggesting that the record-high unemployment rate and austerity measures are starting to weigh on consumers’ budgets.