Thursday 4 August 2005

Service sector strong, eurozone economy improving

Service sector business activity stays strong around the world.

In the US, the ISM index of business activity in the non-manufacturing sector read 60.5 in July, a slight drop from 62.2 in June. The ISM reported that price increases are a primary concern though, with the price index rising 10.5 points over the previous month.

Another concern might be developments in the housing market. The National Association of Realtors said its housing affordability index dropped to 120.8 in the second quarter from 133.2 in the first quarter.

In Europe, the NTC Research Service Sector Business Activity Index for the eurozone rose to 53.5 in July, the same level as May, reversing the fall to 53.1 in June, while that for the UK rose to 56.3 in July from 55.8 in June.

Yesterday, the EU statistics office Eurostat reported that the volume of retail trade grew 0.9 percent in June in the eurozone and by 1.7 percent in the EU25 compared to June last year. Compared to May 200 5, retail sales rose 0.4 percent in the euro zone and by 0.5 percent in the EU25.

According to The Financial Times, Michael Deppler, director of the International Monetary Fund's European department, had this to say of the eurozone economy: "The notion of the first half of this year having been the low point is bearing out and things should be improving."

That did not stop the IMF from cutting its growth forecast for the eurozone to 1.3 percent this year, less than the 1.6 per cent predicted in April, while 2006 growth forecast was cut to 1.9 percent from 2.3 per cent.

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