MILAN, Feb 4 - Italy's service sector grew for a seventh consecutive month in January but at a slower pace than December, a survey showed on Wednesday, as corporate scandals and strikes weighed on consumer confidence. The /ADACI Business Activity Index came in at 57.2, down from 58.0 in December but still above the critical 50.0 no-change mark. The new business index registered 56.9, slowing from December's 58.4. The poll of over 500 firms in service sectors like telecoms, luxury goods, tourism and marketing also showed input costs rising faster than companies could pass them on, suggesting margins could face a squeeze. "There are strong signs the consumer sector remains weak," said Chris Williamson, chief economist at NTC, which prepares the numbers for . "There was quite a significant drop in demand ... which is becoming a concern for a lot of companies."
The service sector survey echoes a slowdown reported on Monday in manufacturing growth, which eased back in January to 51.1 from December's 51.9, with a stronger euro and the Parmalat fraud scandal cited as factors. "The manufacturing sector is causing a drag on services as well," Williamson said. Dairy foods firm Parmalat is struggling to work out a recovery after revealing billions of euros in debts which pushed it to the brink of bankruptcy and left thousands of Italian bondholders facing heavy losses. Optimism among service providers for the year ahead, however, remains strong, the survey said, on the back of improved economic prospects which should drive demand.
The Future Business Activity Index registered 77.0 in January, dipping from 79.8 in December, with nearly 60 percent of firms surveyed expecting to be busier in a year than at present and only five percent seeing more sluggish business. Service providers recruited extra staff for the fifth successive month in January to meet rising workloads, but the overall rate of growth was "only modest," NTC Research said in its statement. Higher staffing levels also meant increased costs, with average input prices rising sharply in January, the survey showed, to 60.51 on an unadjusted basis from 58.10 in December, or to 59.85 from 59.71 on a seasonally adjusted basis. "Panel companies generally linked rising input prices to increased labour costs, following the latest round of salary reviews and staff recruitment," NTC Research said. Prices charged slipped to 50.9 in January from December's 51.3, with under 12 percent of companies reporting an increase in output charges from the previous month. "The rate of output price inflation was only slight, and markedly below that recorded for costs," NTC Research said.//