Improved business activity casts doubt over rate cuts

LONDON - Businesses across the globe broadly enjoyed an improved performance this month with activity picking up across parts of Asia and Europe, surveys showed on Thursday, giving central banks room to potentially defer cutting interest rates.

"Central banks will start cutting but then they will continue to re-evaluate the picture and in our view will realise at the end of the year or the beginning of next year that inflation is stickier than expected," said Vincent Stamer at Commerzbank.In Europe, activity expanded at its fastest pace in a year this month, supported by buoyant demand for services, while the manufacturing sector showed signs of approaching a recovery.

"The PMIs for May suggest that the euro zone economy continued to expand in Q2 while price pressures eased but remained high in the services sector," said Franziska Palmas at Capital Economics. But in France, the bloc's second-biggest economy, the private sector unexpectedly shrank this month after expanding in April with the services industry joining manufacturing in reporting a contraction in activity.

Japan's factory activity crept into expansion for the first time in a year this month, the au Jibun Bank flash PMI showed, as manufacturing gathered pace after months of weakness.

Source: News Formal (newsformal.com)

Rampant Inflation Business Activity Manufacturing Sector Reuters Poll

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