Europe November Services Shrink More Than Previously Estimated
European services shrank at a record pace in November, increasing pressure on the European Central Bank to cut interest rates further this week.
Royal Bank of Scotland Group Plc’s services index dropped to 42.5 from 45.8 in October, remaining below the expansion- threshold of 50 for a sixth straight month. The final reading is the lowest in the survey’s 10-year history and falls short of an initial estimate of 43.3 published Nov. 21. Economists forecast a decline to 43.3, according to the median of 31 estimates in a Bloomberg survey. The index is based on a survey of purchasing managers by Markit Economics in London.
Europe’s economy fell into its first recession in 15 years in the third quarter after the worst financial crisis since the Great Depression pushed up borrowing costs, eroded confidence and hurt demand for exports. Slowing inflation is giving the ECB room to cut rates further as policy makers across the globe seek to limit the economic damage from the financial turmoil online payday loans.
“The extremely weak November service-sector purchasing managers’ survey exerts significant extra late pressure on the ECB to deliver a deep interest-rate cut on Thursday,” said Howard Archer, chief European economist at IHS Global Insight in London.
The ECB has cut its benchmark rate by 100 basis points, or a full percentage point, to 3.25 percent since early October and signaled more reductions are ahead. The central bank will probably cut its key rate by half a percentage point this week, a survey of economists shows. That would be the third reduction since early October.