1 March 2002, 15:50  OUTLOOK Euro zone data next week to show further improvement

LONDON (AFX) - Euro zone data in the coming week are expected to show further improvement with higher readings in area-wide confidence surveys and service sector PMIs on the cards, according to economists. But despite the overall tone, some pockets of weakness are also likely, especially in areas such as employment where lags are usual, they added. "Broad expectations are for business survey data released over the next week to improve given the rise in the German Ifo and French INSEE business survey," Kevin Gaynor, economist at UBS Warburg said. The service sector PMIs are seen rising above the 50-point threshold that marks expansion in all of Europe's major economies. In January, the German reading remained below the 50-point cut off even though the overall euro zone figure featured above that mark. HSBC economists noted that the expectations component of the January index had shot up to 66.3, indicating a strong rise in the February headline figure. "A further improvement seems likely in February," they wrote. But not all the data will point to a rapid economic recovery in the euro zone. Jobless numbers, for instance, are expected to continue rising. "We look for German February unemployment and euro area January unemployment to rise," Gaynor at UBS Warburg said. "With leading indicators of employment such as the Ifo employment expectations and PMI for jobs continuing to deteriorate over the past couple of months, it appears that the bottoming out of the German business cycle has yet to impact the labour market," Jose Luis Alzola at Schroder Salomon Smith Barney said. However, the pace of the rises may soften, he said. It may also be too early for a turnaround in German factory orders, Gaynor at UBS Warburg said. Overall, none of the week's data is likely to pressure the European Central Bank into changing interest rates at its rate setting meeting on Thursday March 7, economists said.

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