(Updating to add analyst comment)
LONDON (AFX) - Services sector growth in the 12-nation single currency area unexpectedly slipped in October, reaching its lowest level in nearly a year, sources said of a key survey.
The Purchasing Managers' Index for the service sector dropped to 56.5 in October from September's 56.7, the lowest level since November 2005 and confounding analysts' forecasts for a modest pick-up to 57.0.
A reading above 50 indicates growth.
The details of the release showed a drop in prices, with input prices easing to their lowest level since June 2005 of 56.9 from 57.9, and with prices charged falling to 53.0 from 53.7, their lowest level since March.
New business dropped to 56.3 from 56.5, while business expectations dropped to 63.0 from 63.6, its lowest level since July 2005. Employment, meanwhile, dipped to 53.2 from 53.1.
The drop in the index came as services sector growth in all three major euro zone countries -- Germany, France and Italy -- all came in below expectations, said Zaki Kada at Thomson IFR Markets.
The drop was widespread across all categories except for employment, which held up well, but the reading still points to healthy growth in the sector and will not prevent further euro zone interest rates from rising further, Kada said.
'The index remains at a healthy expansionary phase and is unlikely to deter the ECB from hiking rates next month,' he said. jessica.mortimer@afxnews.com jkm/jsa COPYRIGHT Copyright AFX News Limited 2006. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News. AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
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