Global| May 04 2005Euro-Zone Service Sector PMI Moves Narrowly in April, Maintaining Modest Growth
Summary
Business activity in European service industries maintained a stable rate of modest expansion in April, according to the purchasing manager surveys conducted by NTC Research and reported today by Reuters, Inc. The overall services [...]
Business activity in European service industries maintained a stable rate of modest expansion in April, according to the purchasing manager surveys conducted by NTC Research and reported today by Reuters, Inc.
The overall services business activity index registered 52.76, off just slightly from March's 52.99. This index, a "net balance" indicator (% rising - % falling) has hovered around 53 for the last six months after slowing pretty consistently over the previous year. It had reached a peak of 57.5 in November 2003. Among the associated measures, new business and outstanding business both resemble the pattern in the "business activity" gauge, while employment has actually had a slight firming tendency over this general 18-month period.
An interesting facet of the European-wide information is an apparent worsening of profit margins. The index for prices charged narrowed by 1.9 points and fell below 50, showing that selling prices rose at fewer companies than they fell. But input prices increased on balance, from 57.72 to 57.98. This is not unusually high for this measure, but it does suggest that operating costs are exerting some pressure on these service producers. After five months of relative improvement in margins, in a single month this spread between selling prices and input prices lost some 45% of that improvement. The input prices, not surprisingly, are strongly influenced by import prices and other wholesale prices. In fact, correlation ratios between this services input price index and various price indicators, including the Euro-Zone import price index, producer price index and producer price index for energy, all run in a range of 80-90%. So rising energy prices as well as prices of other materials are weighing on service sector performance at the same time that these firms are unable to sustain rising selling prices to customers.
Among various countries, recent business activity performances have differed. As seen in the table below, Germany's business activity index fell by about half-a-point in April, while that in France rose more than 3 points. The Italian index was off 4.34 points and in fact, with a reading below 50, showed an outright contraction in its service sector.
| PMI for Service Sector | April 2005 | March 2005 |
|---|---|---|
| Euro-Zone* | 52.76 | 52.99 |
| Germany | 51.32 | 51.80 |
| France | 57.69 | 55.44 |
| Italy | 48.35 | 52.69 |
Carol Stone, CBE
AuthorMore in Author Profile »Carol Stone, CBE came to Haver Analytics in 2003 following more than 35 years as a financial market economist at major Wall Street financial institutions, most especially Merrill Lynch and Nomura Securities. She has broad experience in analysis and forecasting of flow-of-funds accounts, the federal budget and Federal Reserve operations. At Nomura Securites, among other duties, she developed various indicator forecasting tools and edited a daily global publication produced in London and New York for readers in Tokyo. At Haver Analytics, Carol is a member of the Research Department, aiding database managers with research and documentation efforts, as well as posting commentary on select economic reports. In addition, she conducts Ways-of-the-World, a blog on economic issues for an Episcopal-Church-affiliated website, The Geranium Farm. During her career, Carol served as an officer of the Money Marketeers and the Downtown Economists Club. She has a PhD from NYU's Stern School of Business. She lives in Brooklyn, New York, and has a weekend home on Long Island.
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