Strong growth in services in the euro area, differences
August 4, 2010
Growth in the services sector in the euro area has accelerated in July, but with differences between the duo Franco-German leaders, and the South behind, shows the PMI survey published by the private institute Markit Economics.
Calculated based on responses from some 2,000 companies, the final index Markit activity in the services sector rose to 55.8 against 55.5 in June, after it was announced in flash estimate to 56.0 22 July.
Germany, the leading power of the euro area, has once again led the charge, but growth there has not been stronger than initially estimated and, more worryingly, the July survey shows increasing divergence between countries that share the euro.
Activity in services in Italy and was contracted after seven months of expansion, while in Spain it has stalled.
The Italian index fell to 49.6 against 51.5, below 50, which marks the border between expansion and contraction. In Spain, it has decelerated to 51.3 51.8 cons, its lowest level since April.
"The gap between the performance of Germany and France and those of Italy and Spain," said Mark in a statement.
Silvio Peruzzo, economist at RBS, this disparity is cause for concern."The countries of the periphery will suffer more and the markets could question their ability to cope," said he.
In Germany, the PMI services was 56.6 against 54.8 in June, its highest level for nearly three years, but well below the 57.3 announced in the first estimate.
In France the index rose to 61.1, not far from the peak reached 44 months in May, but growth of new business declined and expectations are crumbling.
In the United Kingdom's main trading partner of the euro area, growth in the services was the lowest for 13 months with a decline in the index to 53.1.
And even if the services throughout the euro area have been growing for the eleventh consecutive month, companies had to lower their prices to win customers.
The prices charged component rose to 47.9 against 47.4 in June, but still below the threshold of 50 for the 21st consecutive month.
"Companies still consider their pricing power is limited and must cut back on the price to beat the competition," said Howard Archer at Global Insight IHS."The purchase price inflation was the lowest since three months but the margins of service providers have still been under pressure."
THIRD MONTH OF INCREASE OF EMPLOYMENT
The composite PMI, which combines the services and industry and often serves as a leading indicator for the growth of gross domestic product, has meanwhile increased to 56.7 against 56.0 in June, unchanged compared to the flash estimate.
"The economic recovery in the euro area is confirmed at the beginning of second half," said Chris Williamson, economist at Markit."The latest PMI data suggest a quarterly growth rate of GDP of around 0.7%, the highest rate in three years."
Turned positive in May, the employment component of the composite index continued its climb to 51.4 against 50.6 in June, its highest level since April 2008.
The euro zone recorded a modest growth of 0.2% in the first quarter after increasing 0.1% of GDP over the last three months of 2009.
The latest Reuters poll gives an acceleration to 0.6% in the second quarter but growth slows then again until mid-2011.
For 2011, the consensus gives +1.3%, compared to forecasts growth of 2.0% in the United Kingdom and 2.8% in the United States.
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