European economic recovery is firmly under way, but the millions out of work may have to wait before firms take on more staff, surveys of the key services sector suggested on Wednesday.
Business activity is steaming ahead in both the eurozone and Britain, but companies are hesitant about increasing capacity, the Reuters-sponsored polls showed.
A parallel US survey due at 1500 GMT should flesh out the global picture before Bank of England and European Central Bank interest rate decisions on Thursday and a weekend meeting of finance ministers from the Group of Seven industrialised countries.
The Reuters Eurozone Business Activity Index rose to 57.3 in January, well above the 50 mark, which separates growth from contraction, from 56.6 in December.
Its British equivalent, the CIPS/Reuters business activity index, rose to 59.8, its highest level since June 1997, from 58.5.
A Reuters poll forecasts the US index, compiled by the Institute for Supply Management, will rise to 60.0 from 58.0.
Similar surveys of manufacturing industry published on Monday also showed surging expansion in the world's major economies, with the US barometer leading the way at 63.6, but with euro zone job creation a problem given the strength of the single currency."This is a very positive picture," said Chris Williamson, chief economist at NTC Research, which compiles the European surveys, speaking about the eurozone services findings.
"But it needs to be qualified with the fact that firms are showing a reluctance to expand capacity in line with growth of new business. We need to watch carefully how that trend will continue over coming months, especially in relation to employment."
Most services firms are not boosting staffing levels and the employment index slipped to 48.7 from December's 49.6.
"With...pricing power remaining weak, there is pressure on margins and firms are addressing that with a reluctance to take on extra staff," said Williamson.
"The increased decline in the employment index is an area for concern given that weak labour markets are holding down consumer confidence across the region," said analyst Howard Archer at Global Insight in London.
Of the biggest economies in the survey, France surged to 60.1, its highest level since December 2000, from 58.2 in December. The main German index rose to 55.2 from 54.6.
The Italian service sector dropped to 57.2 from 58.0, its second monthly fall.
While markets are sure the European Central Bank will keep its key rate on hold at Thursday's meeting, the British survey confirmed traders in their belief that the Bank of England will order its second 25 basis point hike in three months.
"Clearly, as far as tomorrow's rate decision goes, we're going to see a quarter point hike. Thereafter the Bank will be looking more closely at the strength of the economy and will probably be pencilling in more rate rises to come," said economist Peter Dixon at Commerzbank Securities.
Comments
Comments are closed.