Euro zone final services PMI hits near 3-year low in May

Investing.com - The euro zone's services sector contracted at a slightly slower rate than initially expected in May, but still shrank at the steepest rate since June 2009, data showed on Tuesday.

In a report, the market research group, Markit said the final euro zone services business activity index stood at 46.7 in May, up from a preliminary estimate of 46.5.

Analysts had expected the index to remain unchanged from a preliminary estimate of 46.5.

On the index, a level above 50.0 indicates expansion in the industry, below 50.0 indicates contraction.

May services PMI data indicates that the sector has fallen into a steepening downturn, in tandem with the stronger decline in the goods-producing sector.

There were also further signs of weakness spreading from the non-core to core nations, with even Germany slipping back into contraction.

German output fell for the first time since last November and, although only modest, the rate of decline was the fastest for almost three years. The downturns in France and Spain accelerated, while Italy saw an easing in its rate of decline but remained firmly mired in a steep downturn.

Commenting on the report, Chris Williamson, chief economist at Markit said, “The final euro zone PMI edged up on the flash reading in May, but nevertheless indicates that the economy is contracting at the fastest pace for around three years.”

“Based on these numbers, it would not be surprising to see GDP for the region contract by 0.5% in the second quarter, though an even steeper decline could be seen if the June data disappoint,” he added.

Following the release of the data, the euro remained lower against the U.S. dollar, with EUR/USD shedding 0.34% to trade at 1.2455.

Meanwhile, European stock markets were mildly higher. The EURO STOXX 50 advanced 0.6%, France's CAC 40 rose 0.8%, Germany's DAX added 0.3%, while London’s FTSE 100 was closed for a public holiday.