Saturday, 22 September 2007

Slower growth ahead for euro zone

The euro zone may be slowing faster than many expected. From Bloomberg:

Europe's manufacturing and service industries grew this month at the weakest pace since 2005 after a sudden increase in credit costs hurt banks.

The slowdown may spell the end of almost two years of interest-rate increases by the European Central Bank. Gains in oil prices and the euro's increase to a record already threaten to damp economic growth.

Royal Bank of Scotland Group Plc said today a preliminary estimate of its composite index fell to 54.5 in September from 57.4 in August. The gauge of services which account for about a third of the economy, had its biggest decline since it was compiled in 1998, after the collapse of the U.S. subprime mortgage market...

The manufacturing index declined to 53.2 from 54.3, while the gauge of services dropped to 54 from 58. Both numbers were lower than economists forecast. A reading of manufacturing orders dropped to 52.4 from 54.8 and the services' measure of new business also declined. A level above 50 indicates growth.

Yesterday, though, investors did not show too much concern about a slowdown. Again from Bloomberg:

The Dow Jones Stoxx 600 Index added 0.5 percent to 376.77...

The dollar fell to a record low against the euro. European government bonds posted the biggest weekly drop in almost two years. The risk of owning European corporate bonds fell today, according to traders of credit-default swaps.

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