New Biz and Output Growth Falters in Eurozone

06 June 2002

A downward blip on the European recovery chart was recorded in May, according to the Reuters Eurozone Service Sector Indexes, published Wednesday by NTC Research.

The indices are based on panel data from Germany, Italy, France, Spain and Ireland – between them accounting for an estimated 83% of Eurozone private sector services output.

Key findings for May were …

Composite Output Index
This fell from a fourteen-month high of 53.2 in April to 52.6 in May. At a level above the 50.0 no change mark, the index signalled an expansion of output of the combined manufacturing and services sectors for the fourth consecutive month. However, the decline in the index reflected an easing in the rate of expansion during the month to a pace only marginally above that recorded in March. The rate of growth also remains well below that seen throughout 2000.

Composite New Business Index
The index dropped from 53.2 in April to 52.4, thereby indicating a moderation in the rate of growth of new business to a pace identical to that recorded in March. Overall employment in the Eurozone private sector economy continued to fall in May, although the rate of decline eased to the weakest in eight months Meanwhile, average input costs rose for the fifth straight month in May, with the rate of increase unchanged on the fourteen-month high recorded in April.

Service Sector Business Activity Index
This also fell – from 53.3 in April to 52.1 in May. Although indicating an expansion of activity for the fifth month running, the pace of growth was the weakest seen since February.

Outstanding Business Index
Another downward blip, falling from 49.2 in April to 48.1 in May, indicating a fall in backlogs of work for the eleventh consecutive month. The decline was the largest recorded since February and reflected the existence of spare capacity arising from weaker than anticipated growth of new business in recent months. The amount of outstanding business varied significantly by national economy, with increases in France, Spain and Ireland offset by falls in Germany and Italy.

The slower rate of expansion was driven primarily by a faltering of growth in Germany, where contraction was reported following two successive months of expansion. All other main national economies continued to expand, but the rate of increase slowed in both France and Ireland. Growth strengthened, however, in Italy and Spain. Ireland again recorded the fastest pace of increase, followed by France.

Business expectations for the year ahead remained buoyant in May, particularly compared to the weakness seen at the end of last year. Optimism regarding future activity levels in fact picked up slightly compared with April, but remained below the nineteen-month high recorded in March.

Data sourced from: NTC Research; additional content by WARC staff