Service numbers add to European imbalances

Poor domestic demand in the service sector has led to further disparities between strong and weak eurozone economies, according to Markit.

The final Markit Eurozone Services Business Activity index for 2010 was 54.2, above the 53.7 flash estimate but lower than the three-month November high of 55.4.

This slowdown in growth may prove temporary as Markit reports new business in December rose at the fastest pace since August. Outstanding business increased at accelerated rates in both Germany and France. (article continues below)

The eurozone’s largest economies have continued to lead the way in business recovery, contrasting sharply with Italy, Ireland and Spain. Incoming new business rose in Germany at its fastest pace since August 2007 and, in France, hit a three-month high.

Germany saw the strongest expansion in business activity as the December rate matched November’s 39-month high. Germany also witnessed the steepest rate of job growth.

France, too, recorded robust expansion despite pension reform protests and bad weather hitting trade and slowing growth. France was the only member state to report a faster increase in employment than in November.

However, the economic activities of other member states, including Ireland, Italy and Spain, have led to a “lopsided” eurozone-wide growth pattern, according to Chris Williamson, the chief economist at Markit. Spain and Ireland suffered contractions in growth. while Italy remains in a state of near-stagnation. All three reported lower levels of incoming work in December as well as job losses.

Despite weakness on the eurozone periphery, input costs continued to rise across the currency union.