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Growth in the euro zone's services sector probably sped up in May, but only fractionally, given the lacklustre consumer demand and concerns over high oil prices, according to economists in a Reuters poll.
The median of 30 forecasts showed the Reuters Eurozone Business Activity Index, which covers some 2,000 service companies, edging up to 54.6 in May from April's 54.5.
"The renewing weakness in consumer confidence on the back of the recent rise in oil prices is likely to have put further nervousness regarding the recovery of the domestic demand," said Frederic Pretet at Calyon in Paris.
"In this context we look for the PMI index to remain around 54.5".
Forecasts for the services PMI, due at 0800 GMT on June 3, ranged from 53.9 to 55.9.
The US services index, published by the Institute for Supply Management, is released at 1400 GMT on June 3 and is expected to slip to 66.0 from 68.4 in April.
Economists said soaring oil prices would likely have a subduing effect on the rate of growth.
US crude has surged by almost $10 a barrel since the start of the year, amid increased global demand, low inventories and concerns over the geo-political situation in the Middle East.
"Higher oil prices will raise costs for many sectors of the service sector, including transport services," said Hann-Ju Ho at Stone & McCarthy Research in London.
"It may also reduce consumers' real incomes," he added.
The companion survey on manufacturing, the Reuters Eurozone Purchasing Managers' Index was released on Tuesday.
The index rose to 54.7 in May from 54.0, thanks to strong exports and a pick up in French consumer demand. Economists had expected the index to slip to 53.8. Unlike the manufacturing PMI, the headline Business Activity Index for the services sector is not a composite calculated from the other indices. Its level merely reflects answers to a specific question in the survey. Both surveys are compiled for Reuters by NTC Research.

Copyright Reuters, 2004

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