European services slowed in Sept on credit rout
Thursday, 4 October 2007
MADRID, Oct 3 (Bloomberg): European service industries grew at the weakest pace in two years in September after a jump in credit costs hurt banks.
Royal Bank of Scotland Group Plc said today its services index fell to 54.2, the lowest since August 2005, from 58 in August. The index is based on a survey of purchasing managers by NTC Economics Ltd and a reading above 50 indicates expansion. The figure is above a Sept 21 estimate of 54.
The credit market slump has added to pressures on European companies already battling a record euro and the highest oil costs ever. The economic slowdown may spell the end of almost two years of interest-rate increases by the European Central Bank, whose governing council meets tomorrow in Vienna.
"We have passed the peak,'' said Elke Speidel-Walz, senior investment strategist at Deutsche Bank AG in Frankfurt. "This will mean the ECB leaves key rates unchanged. Pressure to make a rate cut will rise over the next 12 months.''
The decline in the services measure follows a similar drop in manufacturing earlier this week while Europeans' confidence in their economy dropped to a 16-month low last month, according to a Sept 28 report.
Deutsche Bank, Germany's biggest bank, said last month it will curb hiring and write down the value of leveraged loans after suffering losses in the credit market. The interest rate on interbank loans jumped in August after European lenders revealed losses in the US subprime mortgage market.
Services expansion in the UK cooled to the slowest pace in more than a year last month, a separate report by the Chartered Institute of Purchasing and Supply and Royal Bank of Scotland Group Plc showed today.
The credit market losses compounded rising costs facing the European economy. The price of oil gained 30 per cent this year and touched a record $83.90 last month while the euro reached a record $1.4282 against the dollar this week, making exports less competitive.
"The euro exchange rate is starting to concern us,'' Luxembourg Prime Minister Jean-Claude Juncker said this week.
The single currency rose 0.2 per cent to trade at $1.4180 at 10:41am Frankfurt time today.
The ECB's governing council, which meets in Vienna tomorrow, will leave its benchmark interest rate of 4 per cent unchanged for the rest of the year, according to 10 out of 15 economists surveyed by the news agency.
Royal Bank of Scotland Group Plc said today its services index fell to 54.2, the lowest since August 2005, from 58 in August. The index is based on a survey of purchasing managers by NTC Economics Ltd and a reading above 50 indicates expansion. The figure is above a Sept 21 estimate of 54.
The credit market slump has added to pressures on European companies already battling a record euro and the highest oil costs ever. The economic slowdown may spell the end of almost two years of interest-rate increases by the European Central Bank, whose governing council meets tomorrow in Vienna.
"We have passed the peak,'' said Elke Speidel-Walz, senior investment strategist at Deutsche Bank AG in Frankfurt. "This will mean the ECB leaves key rates unchanged. Pressure to make a rate cut will rise over the next 12 months.''
The decline in the services measure follows a similar drop in manufacturing earlier this week while Europeans' confidence in their economy dropped to a 16-month low last month, according to a Sept 28 report.
Deutsche Bank, Germany's biggest bank, said last month it will curb hiring and write down the value of leveraged loans after suffering losses in the credit market. The interest rate on interbank loans jumped in August after European lenders revealed losses in the US subprime mortgage market.
Services expansion in the UK cooled to the slowest pace in more than a year last month, a separate report by the Chartered Institute of Purchasing and Supply and Royal Bank of Scotland Group Plc showed today.
The credit market losses compounded rising costs facing the European economy. The price of oil gained 30 per cent this year and touched a record $83.90 last month while the euro reached a record $1.4282 against the dollar this week, making exports less competitive.
"The euro exchange rate is starting to concern us,'' Luxembourg Prime Minister Jean-Claude Juncker said this week.
The single currency rose 0.2 per cent to trade at $1.4180 at 10:41am Frankfurt time today.
The ECB's governing council, which meets in Vienna tomorrow, will leave its benchmark interest rate of 4 per cent unchanged for the rest of the year, according to 10 out of 15 economists surveyed by the news agency.