Yesterday's news was the hot service sector in the U.S., and what it might mean for monetary policy. Today's news is the hot service sector in Europe, and what it might mean for monetary policy. From Bloomberg:
Growth at service companies in the dozen euro nations accelerated to the fastest in more than five years in April, giving the European Central Bank more leeway to raise interest rates.
An index based on a survey of 2,000 purchasing managers at companies such as banks and airlines rose to 58.3 from 58.2 in March, said NTC Economics Ltd., which compiles the measure for Royal Bank of Scotland Group. That's the highest since September 2000. A reading above 50 indicates growth.
Europe's economic growth is quickening as an increase in exports filters through to the domestic economy, helping banks including UBS AG report record earnings. As accelerating expansion and near-record oil prices threaten to fuel inflation, the ECB may signal today it is likely to increase rates in June for the third time since the start of December, economists said.
More, from Forbes:
The service sector data comes on the back of an equally strong reading in the manufacturing sector equivalent.
'It will provide further support to expectations of a June rate hike in the euro zone and a hawkish press conference today,' Calyon economist, Mitul Kotecha said.
UBS economist Ed Teather noted price pressures in the service sector release.
He said the rise in the prices-charged sub-index to its highest level since February 2001 is 'perhaps a preliminary sign of price pressure moving down the supply chain'.
This is a key element as the ECB is expected to cite the recent run of strong economic indicators in the region as a key reason for a hike in June even though its meeting today is predicted to result in no change.
Looks like June will be an interesting month.