European Services Growth Slowed in March, PMI Shows
European services growth slowed in March after the euro rose to a record and the U.S. economic downturn deepened.
Royal Bank of Scotland Group Plc said its index of growth in service industries from banks to airlines fell to 51.6 from 52.3 in February. That's lower than an initial estimate of 51.7 published March 20. The index is based on a survey of purchasing managers and a reading above 50 indicates expansion.
Confidence among European executives and consumers fell more than economists forecast last month on concern that a possible U.S. recession will weigh on European expansion. With inflation running at the fastest pace in almost 16 years, the European Central Bank is reluctant to cut borrowing costs to bolster the economy.
“The appreciation of the euro and the economic slowdown in the U.S. carry the risk that we'll see a further weakening in services growth over the medium-term,'' said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt.
In Germany, Europe's biggest economy, services growth unexpectedly slowed, with a gauge dropping to 51.8 from 52.2. The initial estimate was for an increase to 52.5 free credit report and score. Services growth also decelerated in France, while in Italy the pace of contraction slowed.
IMF Cuts Forecast
The International Monetary Fund has lowered its forecast for 2008 euro-region economic growth to 1.3 percent from 1.6 percent, according to a background paper obtained by Bloomberg News yesterday. That would be the slowest expansion since 2003.
The worst U.S. financial crisis since the Great Depression has spread to Europe and “growth in the U.S. and Europe is slowing sharply,'' the fund said.
At the same time, the euro has gained 17 percent against the dollar in the past 12 months, reaching a record $1.5903 on March 17 and eroding European export competitiveness.
Royal Bank's composite purchasing managers' index, which combines services and manufacturing and accounts for about half of the economy, fell to 51.8 from 52.8. The gauge of manufacturing growth slipped to 52 from 52.3 in February.
Filed under: economics by Finance Boss