Eurozone growth slows, orders dry up

LONDON: European services growth slowed in June in the face of sluggish new orders and rising interest rates, giving firms less optimism about the year ahead, business surveys showed yesterday.

The eurozone service sector grew at its weakest pace since October with an unexpectedly deep contraction in Italy and smaller eurozone countries masked by resilience in Germany and France.

In Britain, the Markit services purchasing managers index (PMI) showed growth was still not strong enough to generate any meaningful increase in employment.

The monthly surveys echoed earlier data from China, which showed growth in its fledgling services sector slowed slightly in June, and data due from the US today are also expected to highlight weaker growth.

Still, the European Central Bank (ECB) is likely to raise interest rates for the second time in four months tomorrow even though the PMI data provide little reason to do so.

“The rate at which growth appears to be easing off will only raise concerns that the current trend may amount to more than a usual cyclical slowdown,” said Janet Henry, economist at HSBC.

“We continue to expect that the ECB, following the signalled increase expected for July, will slow down the process of interest rate normalisation, with the next rate rise not expected until November.”

Markit revised down sharply its June PMI to 53.7 from 54.2, which was already down substantially from 56 in May.

The composite PMI, which combines the services and manufacturing data published last week, fell to 53.3. Reuters