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Eurozone service sector growth slows

Growth in the eurozone services sector slowed slightly in May, while business confidence fell to its lowest level in a year-and-a-half, a survey suggests.

The closely-watched Markit PMI Services index fell to 56.0 from 56.7 in April. Any reading above 50 indicates growth.

However, the rate of job creation increased slightly, Markit said.

France and Germany continued to drive the longer-term recovery in the sector, while Italy, Spain and the Irish Republic saw limited growth, it added.

France recorded "by far the strongest" increase in business activity with the rate of growth only slightly lower than April's figure, which was a 10-year high. Germany also reported "robust" growth.

But outside these two economies "the trend was much weaker", Markit said.
Two-speed recovery

Business expectations for activity in one year's time also fell to their lowest level since November 2009.

This reflected less new business and concerns about the wider economic outlook.

The fall in confidence meant the rate of growth in the service sector was likely to slip further in the coming months, Markit said.

"The first quarter may well therefore be as good as it gets this year," said Chris Williamson, chief economist at the research group.

"Growth disparities between the core and the periphery are a growing concern, as deficit-fighting austerity measures hit domestic demand in the debt-laden periphery, leaving service providers particularly exposed."

However, he said despite the slowdown, the eurozone service sector remained "robust" and should make a "significant contribution" to overall economic growth in the current quarter.

BBC News

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