The eurozone private sector expanded at its fastest pace in a year in May, as strong demand boosted production and recruitment amid cooling inflation.

S&P Global and Hamburg Commercial Bank’s (HCOB) composite output index came in at 52.2 in May, up from 51.7 the previous month. The May reading showed the strongest increase in economic activity since May 2023.

According to HCOB chief economist Cyrus de la Rubia: “The spectre of recession is off the table. This is thanks to the service sector, where the upswing has recently broadened. In Germany, we can now talk of an upward trend, Italy’s business activity remains solid, and Spain has improved from an already strong position. Only France has experienced a setback, slipping into slightly negative territory. Overall, the service sector is likely to ensure that the eurozone will show positive growth again in the second quarter.”

Meanwhile in the US, the contraction in factory activity accelerated in May as output almost stagnated. The Institute for Supply Management’s manufacturing purchasing managers’ index fell to 48.7 in May from 49.2 the previous month, the research group said on Monday, noting higher references to “softening” from survey respondents.

It was both the second consecutive fall and the second month the indicator came in below the 50 level that separates expansion from contraction. Economists had a median estimate for 49.6. The US manufacturing sector faces multiple headwinds such as high borrowing costs, weaker consumer spending, subdued business investment and the persistent challenge of inflated input costs.

Finally, the German unemployment rate held steady at a low rate for a sixth straight month in May, reflecting a buoyant jobs market.

According to a report by the Federal Labour Bureau, the seasonally adjusted jobless rate in Europe’s largest economy held at 5.9 per cent, the same level for the sixth month in a row and in line with expectations. On the other hand, the number of people out of work rose to 2.762 million, a rise of 25,000 and much more than the 10,000 predicted. It is the 17th consecutive month that unemployment has risen and the jobless total continues to hover near three-year highs. The spring recovery did not really get going this year, the Federal Labour Agency CEO Andrea Nahles said. Unemployment and underemployment also fell in May, but not as sharply as in most previous years, she added.

This article does not constitute legal and/or financial advice and is being issued for information purposes only by Bank of Valletta plc, 58, Zachary Street, Valletta. Bank of Valletta is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap. 370 of the Laws of Malta).