Eurozone service sector growth weakens

French and Spanish consumers helped to keep the euro zone service sector growing in April, but optimism waned as companies felt the chill from a downturn in manufacturing, surveys showed on Wednesday. The Eurozone Service Sector Business Activity Index, produced by NTC Research, slipped to 52.8 from 53.0 in March, just above a 52.6 consensus forecast and well clear of the 50 level which divides growth from contraction. "The index did decline and that pulls the European Central Bank away from the possibility of hiking any time soon," said Ed Teather at UBS in London. The services economy shrank in Italy and growth weakened in Germany. NTC said companies throughout the region were struggling to sell services to the manufacturing sector.
The business expectations index, which measures how confident services companies feel about business in 12 months' time, fell four points to 63.5 from 67.5 in March.
NTC's companion Purchasing Managers' Index on the eurozone manufacturing sector, published on Monday, slid into contraction at 49.2 from 50.4 in March.
Manufacturers in developed countries are facing tough competition from Chinese goods in both their export and domestic market.
The equivalent US manufacturing index, produced by the Institute for Supply Management, also fell in April, showing weaker growth at 53.3 from 55.2. The US non-manufacturing index, due at 1400 GMT, is forecast to fall to 61.0 from 63.1.
In the eurozone, manufacturers' pain has been deepened by the euro's strength against the dollar.
The eurozone service sector indices are based on data from over 2,000 companies in Germany, France, Ireland, Italy and Spain, accounting for 83 percent of private sector services output.
A composite index, combining the services PMI with the manufacturing survey of around 3,000 companies, slipped to 51.8, its lowest level since November, from 52.5 in March.
The eurozone new business index for services rose to 52.7 in April from 51.4.
A fall in the prices charged index, to 49.2 from 51.0, while input prices rose to 58.0 from 57.7, showed companies' margins being squeezed as they absorbed higher energy costs rather than risk passing these on to customers.
In Germany, the business activity index slipped to 51.3 from 51.8 in March, while in Italy it fell to 48.4 - the lowest level since the Italian survey began in January 1998.