Service sectors see Europe-wide spending rise

THE European services industry, including companies such as airlines and banks, grew for the first time this year in July, another sign consumer and corporate spending is picking up and spurring economic growth.

A survey of about 2,000 companies compiled by NTC Research in England, rose to 50.2 in July from 48.2 in June, better than the 48.7 expected. A reading of more than 50 indicates expansion.

Business confidence in Germany and France, the biggest economies in the 12 euro nations, rose in July, after the European Central Bank cut its benchmark lending rate to a 50-year low. The falling cost of money is fuelling spending on homes, stocks and bonds and holidays, boosting services, which accounts for more than half of Europe’s $8 trillion economy. “Housing credit is still going up,” said Filipe Pinhal, vice chairman of Banco Comercial Portugues , Portugal’s second biggest bank. “We’re seeing a trend of people changing for better homes.”

The ECB cut its benchmark lending rate to 2% in June, the lowest in any of the 12 countries sharing the euro in at least 50 years. In Spain, the drop in rates has led to record demand for houses and apartments, driving up home prices 15% last year.

Banks are also being helped by rising stock markets, which boosts earnings from their trading businesses. Europe’s Dow Jones Stoxx 50 Index has gained about 27% since reaching a six- year low in March, amid indications of a US rebound and planned tax cuts in France and Germany.

British banking, transport and other service industries expanded at the fastest pace in more than a year in July, as orders increased. The Chartered Institute of Purchasing and Supply's index of services was 56.6, the highest since May 2002, compared with 54.5 in June. A reading above 50 indicates expansion; anything less, contraction. Economists had expected a reading of 55.

The Bank of England cut interest rates to near a 50-year low of 3.5% in July on concern weak global demand and slowing consumer spending were dragging on the UK economy, which grew 0.3% in Q2.