The euro zone's services sector expanded more slowly in February than previously expected, but firms recorded an increase in backlogs of work for the first time in two years, a survey showed today.
The data also showed a further widening in the growth rates of the big four economies in the 16-member euro area. Spain's services sector contracted at a faster pace last month while services in Germany, France and Italy continued to expand.
Markit said its final Eurozone Services Purchasing Managers' Index of around 2,000 companies, ranging from banks to hotels, fell to 51.8 in February from 52.5 in January, revised down from a flash estimate released two weeks ago of 52.0.
This marked the sixth month running the index has been above the 50.0 mark that divides growth from contraction. At this time last year the index was languishing at an 11.5 year survey low of 39.2 amid the worst recession since the Second World War.
Earlier data from Spain showed its services PMI fell to 47.1 from 48.8 in January -- its 26th month below 50. Germany's index dipped to 51.9 from 52.2, while France's service PMI dropped to 54.6 from 56.3. The Italy PMI nudged down to 50.8 from 50.9.
"These divergences raise concerns about the sustainability of the recovery, as well as posing difficult questions for policymakers," said Chris Williamson at Markit.
"Services are clearly struggling to enjoy any spill-over benefits from the more robust growth we are currently seeing in manufacturing. GDP growth, and the sustainability of the upturn, are at risk from this renewed weakness," he said.
The euro zone economy in the third quarter of 2009 emerged from five quarters of contraction, its worst post-war recession.
It grew by 0.1 per cent in the final three months of last year and economists polled by Reuters predict modest growth over the coming year.
Data released on Monday showed the euro area's manufacturing sector grew faster than previously thought last month, with the PMI hitting its highest level since August 2007. The combined composite PMI held steady at 53.7 last month, in line with the flash estimate.
The service sector's backlogs of work index rose to 50.1 in February from January's 48.9, the first time the index has been above 50 since February 2008, suggesting firms have slightly more orders than they are able to fill.
The composite new business index held steady at January's 26-month high of 53.6, with an increase in Germany offset by a decline in Ireland and Spain.
The composite employment index remained below 50 for the 20th month as firms also slashed jobs to cut costs.
Official data released on Monday showed unemployment held at 9.9 per cent in January.
Reuters