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Eurozone Business Activity Slows to 28-Month Low

However manufacturing sector is showing resilience.

Business activity in the 13-nations sharing the euro slowed more than expected in December, hitting the lowest level in 28 months due to weakness in the service sector, a survey showed Dec. 17. First results for NTC Research's survey of business leaders fell to 53.3 points in December, down from 54.1 points in November to touch the lowest level since August 2005. Although the result fell short of economist forecasts for 53.5 points, it was nevertheless still above the 50-point level that indicates expansion.

The service sector output index dropped to 53.2 points in December from 54.1 in November while the manufacturing index eased to 52.5 from 52.8.

Economists said the survey added to the growing evidence that the eurozone economy is slowing, led by weakness in the vast services sector. "Again, like in November, the services performance was the negative surprise," UniCredit economist Aurelio Maccario said. However, "the manufacturing sector continues to show a great deal of resilience, especially when one considers the headwinds -- a strong currency, slowing global momentum, tighter credit standards -- it is currently facing," he added.

Bank of America economist Gilles Moec said that slower activity was evidence that consumers, pinched by high food and energy prices, are reining in spending on services. "Today's (figures) reflect the growing toll the price spike is taking on consumer spending and hence on the domestic-oriented tertiary sectors (of the economy)," he said.

Copyright Agence France-Presse, 2007

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