LONDON, Jan 6 - The euro zone's service sector grew at a slower pace in December but companies remain optimistic about future business conditions, according to a survey published on Tuesday. The Eurozone Services survey of more than 2,000 companies dashed expectations for a sixth month of accelerating growth in the sector, which accounts for about two thirds of the euro zone economy, and also showed companies remain reluctant to take on extra staff. However, NTC Research, which compiles the survey for , said: "At a level well above the 50.0 no change mark, the index continued to signal a strong rate of expansion." The headline business activity index slipped to 56.6 in December from November's 37-month high of 57.5. The consensus forecast was 57.8. The business expectations index, measuring optimism about conditions over the next 12 months, slipped slightly to 71.0 from 71.3 in November.
But it remained well above the year's low of 59.6, hit in March when the Iraq war began. Companies reported growing confidence among their customers that global economic recovery was taking hold. NTC said the expectations index "continued to point to further robust expansion of business activity in coming months." The Eurozone Composite Index, which combines the services data with the companion manufacturing survey released on Friday, eased to 55.8 in December from 56.2. However, NTC said the overall pace of expansion suggested the euro zone private sector had experienced its strongest growth during the fourth quarter of 2003 since fourth quarter 2000.
GERMAN CONFIDENCE GROWING
The global economic recovery has been led by the United States, where the equivalent index eased to 60.1 in November. The December U.S. survey, compiled by the Institute for Supply Management, will be released at 1500 GMT on Tuesday. In the euro zone, the pace of service sector growth slowed in December in all the three biggest economies -- Germany, France and Italy. Optimism also weakened a little in France and Spain, but improved in Italy, while in Germany NTC said the expectations index rose to its highest level since April 2000, "largely reflecting confidence in the sustainability of global economic recovery." Anecdotal evidence in Germany, whose economy is emerging from three years of stagnation, "showed increased spending amongst clients, as well as a suggestion from some panellists that contracts were growing in both value and duration." The euro zone new business index fell to 56.9 from November's 38-month high of 57.9, although NTC said it remained well above the 53.5 average over the survey's five-and-a-half year history. Growing demand for services meant companies were able to increase their charges, albeit modestly, for the first time since July 2002, with the prices charged index rising to 50.3 from 50.0 in November. However, job creation remained a weak area, with the employment index dipping back into contraction at 49.6 from 50.3 in November.
NTC said the data and anecdotal evidence suggested many companies, particularly in Germany, were aiming to meet increased demand for services through productivity gains rather than by taking on more staff. This helped to hold down companies' costs, with the input price index rising only modestly to 55.6 from 55.5, still below the survey average of 56.9. "Italy recorded by far the strongest rate of inflation, reflecting its tighter labour market, while Germany recorded the weakest rise, with employee earnings growth remaining low as a result of further job shedding," NTC said.//