Business activity in the euro zone's dominant service sector quickened in May as stronger consumer demand in France helped companies win new business, a major survey showed today.
The Reuters Eurozone Business Activity Index, which covers over 2,000 services companies, rose to 55.8 in May from 54.5 the previous month, beating the consensus forecast of 54.6.
High oil prices put pressure on profit margins, but despite this companies won enough new clients to halt job losses for the first time since November 2003.
The survey features data from businesses such as airlines, banks and restaurants in Germany, France, Ireland, Italy and Spain, which together account for around 83 per cent of private sector output in the euro zone.
May marked the 11th month of expansion for the sector, with the index keeping above the 50.0 threshold separating growth from contraction. However, the pace of expansion remained lower than peak levels seen in late 2003 and in January.
Soaring oil prices put pressure on margins in May, as companies faced heftier fuel and energy bills but, in a highly competitive environment, were unable to pass the costs on to customers.
Input prices rose at their fastest pace since April 2002, whilst prices charged fell for the fourth month in a row, though the pace of decline slowed.
Rising input prices restrained companies' optimism about the future. The business expectations index - which tracks whether companies expect business to be better, the same or worse in 12 months' time - rose to 66.1 from April's 11-month low of 64.2 but remained well under January's peak of 71.5.
Weak consumer demand, concerns over the strength of the euro and worries over the geopolitical situation also helped keep the index at a relatively low level.