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Wednesday, October 04, 2006

Eurozone: One More Indicator To Add To The List

The Royal Bank of Scotland services index fell yesterday to 56.7, a 10-month low, from 57.4 in August. As Bloomberg wryly note, this is the biggest part of the economy. In that sense people may have been far too focused on industry and construction.

Growth in European service industries such as telecommunications and banking, the biggest part of the economy, slowed more than forecast in September after borrowing costs and unemployment climbed.

With interest rates increasing, a planned tax rise in Germany and a U.S. slowdown clouding the outlook, the International Monetary Fund expects euro-area growth to slow to 2 percent next year from 2.4 percent in 2006. Unemployment in the dozen countries sharing the euro rose in August for the first time in almost three years, a report showed yesterday.

One more little finicky detail, oil is falling, but if the economies didn't slow *that* much as it rose, then that does provide some sort of context for thinking about how much benefit we will see as it falls. My feeling is that many people seem to be challenged when they have to think about more than one thing at a time. Oil fell yesterday, and stocks rose. But if oil fell because growth was looking weaker for 2007, why should this be good news for stocks? I would be watching what happens next in the equity markets.

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