Europe's services sectors shrank in December

[January 06, 2009]  LONDON (AP) -- Europe's services sector continued to contract sharply in December while the jobs outlook looked increasingly bleak, closely watched surveys showed Tuesday.

The monthly purchasing managers' index for the then 15 nations that share the euro -- Slovakia joined on Jan. 1 -- fell to 42.1 in December, its lowest in the survey's ten-year history, from 42.5 in the previous month. A reading below 50 indicates contraction and the bigger the difference, the greater the contraction.

In addition, the survey showed that employment in the sector contracted at its fastest rate since August 2003, stoking further fears that consumers will rein back spending even further.

The equivalent reading in Britain rose slightly, to 40.2 in December from November's record low of 40.1, but remains deep in recession territory. December's reading was the second worst since the survey began in mid-1996. Employment in the sector also contracted at a record rate.

Both surveys will likely provide further ammunition to the European Central Bank and the Bank of England to cut interest rates again this month.

The Bank of England is widely tipped to cut its benchmark interest rate by at least a further half percentage point from the current 2 percent on Thursday, while the European Central Bank is also expected to reduce its main rate by at least half a percentage point from 2.5 percent next week.

[Associated Press]

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