More Glimmers of Growth in Europe, Japan
Enviado: 5/8/2003 12:14More Glimmers of Growth in Europe, Japan
Tuesday, August 05, 2003 6:53 a.m. ET
By Ruth Pitchford
LONDON (Reuters) - Service sector companies across Europe are gaining confidence about the future and even in Japan's gloom-bound economy, business conditions are improving, according to data published on Tuesday.
A survey of more than 2,000 euro zone services firms -- ranging from airlines to cleaning firms -- showed a return to modest growth in July after six months of shrinking business.
The main index for the sector, which accounts for two-thirds of the region's economy, jumped two points to 50.2, just over the neutral 50 level.
In Japan, an official business survey showed conditions becoming a little less unfavorable in the three months to June, while the government slightly upgraded its assessment of the economy for the first time in five months as stock prices held on to recent gains and U.S. economic prospects improved.
The data follows more upbeat survey results from manufacturers around the world last Friday as customers start to shrug off the economic doubts and global political worries that have plagued businesses over the past couple of years.
"The economy is beginning to improve, but it's certainly not firing on all cylinders," said Ken Wattret at BNP Paribas in London.
Some caution remains about the speed and strength of the upturn.
"In Western Europe, we are not anticipating a lasting recovery before the start of next year," said carmaker Audi, adding that unemployment is still a worry in many households.
"Despite the higher level of confidence, a recovery in consumption by private households is therefore unlikely in the short term," said Audi, a unit of Volkswagen <VOWG.DE>.
Financial markets will now look at the growth rate in the U.S. services sector shown by the Institute for Supply Management survey, due at 10 a.m. EDT. Economists forecast that to fall to 58.0 after surging to 60.6 in June.
RATE CUTS IN QUESTION
In Britain, Tuesday's survey data showed services sector growth surged to its fastest pace for over a year in July at 56.6 from 54.5 in June, quashing any lingering expectations of a Bank of England interest rate cut this week.
Even in Germany, where a loss of economic confidence had dragged down business across the euro zone, companies suddenly regained optimism, helped by promised tax cuts.
"There seems to be greater clarity about the business environment and improvements in expectations of growth both domestically and globally," said Chris Williamson, chief economist at NTC Research which compiles the European business surveys for Reuters.
However, many financial market economists say the recovery could still need further assistance from official rate cuts, particularly in the euro zone.
"We still believe that the ECB will cut rates again, but certainly for the moment, market skepticism about when it will be delivered will increase," said Wattret.
Much now depends on whether consumers can shrug off job insecurity and keep spending while businesses regain profitability and the confidence to invest.
"Unemployment is a lagging indicator, but we know from the survey history that it can turn up quickly," said NTC's Williamson. "That will be the key indicator in coming months."
Copyright © 2003 Reuters Limited.
Tuesday, August 05, 2003 6:53 a.m. ET
By Ruth Pitchford
LONDON (Reuters) - Service sector companies across Europe are gaining confidence about the future and even in Japan's gloom-bound economy, business conditions are improving, according to data published on Tuesday.
A survey of more than 2,000 euro zone services firms -- ranging from airlines to cleaning firms -- showed a return to modest growth in July after six months of shrinking business.
The main index for the sector, which accounts for two-thirds of the region's economy, jumped two points to 50.2, just over the neutral 50 level.
In Japan, an official business survey showed conditions becoming a little less unfavorable in the three months to June, while the government slightly upgraded its assessment of the economy for the first time in five months as stock prices held on to recent gains and U.S. economic prospects improved.
The data follows more upbeat survey results from manufacturers around the world last Friday as customers start to shrug off the economic doubts and global political worries that have plagued businesses over the past couple of years.
"The economy is beginning to improve, but it's certainly not firing on all cylinders," said Ken Wattret at BNP Paribas in London.
Some caution remains about the speed and strength of the upturn.
"In Western Europe, we are not anticipating a lasting recovery before the start of next year," said carmaker Audi, adding that unemployment is still a worry in many households.
"Despite the higher level of confidence, a recovery in consumption by private households is therefore unlikely in the short term," said Audi, a unit of Volkswagen <VOWG.DE>.
Financial markets will now look at the growth rate in the U.S. services sector shown by the Institute for Supply Management survey, due at 10 a.m. EDT. Economists forecast that to fall to 58.0 after surging to 60.6 in June.
RATE CUTS IN QUESTION
In Britain, Tuesday's survey data showed services sector growth surged to its fastest pace for over a year in July at 56.6 from 54.5 in June, quashing any lingering expectations of a Bank of England interest rate cut this week.
Even in Germany, where a loss of economic confidence had dragged down business across the euro zone, companies suddenly regained optimism, helped by promised tax cuts.
"There seems to be greater clarity about the business environment and improvements in expectations of growth both domestically and globally," said Chris Williamson, chief economist at NTC Research which compiles the European business surveys for Reuters.
However, many financial market economists say the recovery could still need further assistance from official rate cuts, particularly in the euro zone.
"We still believe that the ECB will cut rates again, but certainly for the moment, market skepticism about when it will be delivered will increase," said Wattret.
Much now depends on whether consumers can shrug off job insecurity and keep spending while businesses regain profitability and the confidence to invest.
"Unemployment is a lagging indicator, but we know from the survey history that it can turn up quickly," said NTC's Williamson. "That will be the key indicator in coming months."
Copyright © 2003 Reuters Limited.