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Services growing at slower pace than '09

LOWER growth in the vital services economy this month may have slowed expansion in euro area output for the first time since last January.

A survey of purchasing managers -- regarded as a good early guide to economic data -- showed the pace of manufacturing continuing to increase. Services were still growing, but at a slower pace than December, leaving overall growth lower.

This composite index for the 16-nation euro region fell to 53.6 from 54.2 in December, London-based Markit Economics said. A reading above 50 indicates expansion. The services index dropped to 52.3 in January, from 53.6 in the previous month, while manufacturing's increased to 52 from 51.6.

This indicator of slower growth follows comments by European Central Bank Executive Board member Juergen Stark on Wednesday that growth in the first half of 2010 may be "somewhat more muted" than in the second half of last year.

ECB President Jean-Claude Trichet said last week that the euro economy would expand at "only a moderate pace" this year. Yesterday, the central bank's monthly report repeated his view that the current 1pc interest rates was "appropriate", signalling no early increase.

Bundesbank president Axel Weber, who is increasingly tipped to succeed Mr Trichet next year, said yesterday that he could not rule out flat growth in Germany in the current quarter, although it probably grew in the last three months of 2009.

"I see a bumpy road ahead for the euro-zone recovery but the underlying dynamic is intact," he said.

The ECB's operations to lend cash to the banking sector markets should be returning toward normal over the course of this year.

Irish Independent