Germany and France showing way in euro zone expansion

The expansion was again dominated by Germany and France, which masked virtual stagnation in Spain and slowing growth in Italy and Ireland, and has come at a cost as firms ramped up their prices.

The Markit Eurozone Services Purchasing Managers’ Index, which measures changes in the activities of euro zone firms ranging from banks to restaurants, slipped to 56.7 in April from the previous month’s near four-year high of 57.2.

This marked its 20th month in a row above the 50 mark that divides growth from contraction with the figure revised slightly down from a preliminary reading of 56.9 released two weeks ago.

“Despite the fall in the euro zone PMI’s Activity Index, the April survey provides little to worry about on the growth front, consistent with the service sector growing at a quarterly rate of roughly 0.7-0.8 per cent at the start of the second quarter,” said Chris Williamson at data compiler Markit.

“Of greater concern was the news on inflation and national variations in performance, with fast growth stoking inflationary pressures in France and Germany while the region’s periphery stagnates.”

The output price index rose to 53.0 last month, its highest level since July 2008 and up from March’s 52.3, as firms grew increasingly confident about passing on soaring input costs to customers. Official flash data showed consumer prices in the bloc rose 2.8 per cent in April.