Growth in Britain's dominant services sector all but dried up in April, sliding to a five-year low as companies struggled against the sharpest rate of cost inflation on record, a survey showed.
Sterling fell and interest rate futures rallied as investors felt the weak activity reading might tip the balance in favour of an interest rate cut from the Bank of England this week, despite current inflation worries.
Confidence in the services sector fell to its lowest since the aftermath of the attacks on the United States in 2001, with fears intensifying about the impact of the credit crunch on the economy beyond the hard-hit financial sector.
The Chartered Institute for Purchasing and Supply/NTC purchasing managers' index fell to 50.4 from 52.1 in March, the lowest reading since March 2003 and below analysts' forecasts of 51.6.
Germany's services sector expanded for the third month running in April and at its fastest pace in six months, buoyed by a marked upturn in new business growth, a survey showed today.
NTC Research's business activity gauge for German firms ranging from banks to catering rose to 54.9 from 51.8, holding above the 50 mark separating expansion and contraction for the third month running and hitting its highest level in six months.
Even so, firms were less upbeat about the corporate outlook. Business expectations remained in the 'expansion' zone, but stayed well below the long-run series average, registering 51.2.
France's service sector also grew at its weakest pace in nearly five years in April as an economic slowdown stemmed the flow of new business, a NTC/CDAF survey showed today.
Their Purchasing Managers' Index of the French services sector, covering companies from IT to transport, dropped sharply to 52.8, its lowest since August 2003, from 57.3 in March.
It was a steeper drop than expected by economists, whose consensus forecast was 54.0, and drove the index well below its long-term average of 57.7.
"The subdued rise in activity during the latest month marked a significant turnaround from the resilience seen in the first quarter of the year and suggests that deteriorating economic conditions may finally be taking their toll on France's dominant service sector," NTC said in a statement.