Services PMI highlights eurozone disparities

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.

Germany and France have both continued to lead the way in terms of business recovery, contrasting sharply with Italy, Ireland and Spain. New work rose in Germany at the fastest pace since August 2007 and hit a three-month high in France.

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

France too recorded robust expansion despite protests over pension reforms and adverse weather conditions hitting trade and slowing growth. France was the only member state to report a faster increase in employment than in November. (article continues below)

However, the economic activities of other member states, including Ireland, Spain and Italy, have led to a ‘lopsided’ eurozone-wide growth pattern, according to Chris Williamson, the chief economist at Markit.

Spain and Ireland both experienced contractions in growth whilst 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, inflation continued to rise across the currency union.

Italy and France both recorded a four-month peak in terms of input price inflation, while Germany’s reached a 27-month high. The rates of increase slowed to a six-month low for Spain. Ireland saw costs rise for the first time since the end of 2008.

Service sector charges increased in December for the first time since October 2008, reflecting part of the cost increase being passed on to clients.