Services accelerate in Europe and US

The ECB is in no rush to raise interest rates, Bloomberg reports.

European Central Bank President Jean- Claude Trichet signaled no immediate plans to raise interest rates even though the bank expects inflation to stay above its 2 percent limit for longer than it predicted just three weeks ago.

Trichet said the ECB’s benchmark rate, which it left at a record low of 1 percent today, remains “appropriate” and despite “short-term upward pressure,” inflation risks are balanced. The euro fell more than a cent against the dollar as investors pared expectations for an increase in borrowing costs.

This is despite evidence that the economy and inflation in Europe are accelerating. From Reuters:

Vibrant growth in the euro zone and British services sectors brought with it new evidence of surging inflation pressures during January, according to business surveys published on Thursday...

Thursday's PMIs showed the costs paid by companies for raw materials and fuel grew at the fastest rate in more than two years in the euro zone and UK...

The Markit Eurozone Services PMI rose to 55.9 in January from 54.2 in December, higher than an earlier flash estimate of 55.2 and its 17th month above the 50 mark that divides growth from expansion. However, surveys from individual bloc countries showed ongoing weakness in Spain and Italy.

Britain's services PMI hit an eight-month high of 54.5, according to preliminary figure, up from the 49.7 in December that foreshadowed a shock economic contraction of 0.5 percent in the fourth quarters.

The Fed also looks unlikely to raise rates soon with Chairman Ben Bernanke saying on Thursday that the US needs to see faster job growth for a sufficient time before policy makers can be assured the economic recovery has taken hold.

Meanwhile, US economic data on Thursday continued to be positive. Bloomberg reports:

Service industries in the U.S. expanded in January at the fastest pace since August 2005, indicating the economic recovery is broadening.

The Institute for Supply Management’s index of non- manufacturing businesses rose to 59.4, exceeding the median forecast in a Bloomberg News survey, after December’s 57.1. Readings above 50 signal expansion in the gauge that covers about 90 percent of the economy...

The number of Americans filing first-time claims for jobless benefits fell last week, a report from the Labor Department showed today. Applications for unemployment insurance dropped by 42,000 to 415,000 in the week ended Jan. 29. Economists surveyed by Bloomberg projected 420,000 claims, according to the median estimate.

Factory orders rose 0.2 percent in December, led by demand for business equipment, Commerce Department figures showed. Orders for non-defense capital goods excluding aircraft increased 1.9 percent.