CEE: Business expectations in Germany slightly recovered after April

On the radar

• The Composite PMI Index in Eurozone was down to 49.5 in May, while in Germany it declined to 48.6.

• In Slovenia real wage growth landed at 5.9% y/y in March.

• In Hungary, unemployment rate was released at 4.4%.

• Otherwise, there are no releases scheduled for today.

Economic developments

Global markets were influenced by Eurozone PMI data for May, which showed flash Manufacturing PMI Index at 49.4 (expected 49.2). Sentiment in services was weaker, however, at 48.9 (expected 50.5), bringing the Composite PMI Index down to 49.5. In Germany, Composite PMI Index showed weakening of the sentiment as well. While the Manufacturing PMI increased to 48.8, the sentiment in the service sector deteriorated. In Germany, the Manufacturing PMI has been increasing slowly but surely over last year. What is important, businesses’ expectations towards output in the next 12 months recovered somewhat in May, after having slumped to a six-month low in April amid widespread tariff-related concerns and uncertainty according to the statement. On the top of that, the other barometer of German economy, the ifo Index, also showed improvement of expectations (ifo Expectations up to 88.9 in May) pushing the overall index up as well to 87.5. Finally, the U.S. PMI figures for May were stronger than anticipated, with manufacturing at 52.3 (expected 49.9) and services at 52.3 (expected 51.0).

Market developments

Hungarian central bank Governor Mihaly Varga said that bank’s focus is lowering households’ inflation expectations and guaranteeing financial stability. The economic growth will also be lower than expected according to Varga. Romania’s newly elected president Dan expects several weeks of negotiations on a new government, saying the key focus needs to be on tackling the budget crisis and avoiding a credit rating downgrade. According to Dan, budget deficit target for Romania in 2025 is 7.5% of economic output, adding that preliminary talks on the 2025 and 2026 budgets do not include tax increases. The FX market has been stable in recent days as well as the bond market.

Download The Full CEE Macro Daily