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Last Updated: Tuesday, 5 December 2006, 15:28 GMT
Services boom hints at rate rises
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Growth in the service industry is driving European economic growth
Growth in the eurozone and UK services sectors rose faster than expected in November, enhancing the prospects for more interest rate rises.

The UK's purchasing managers' index (PMI) showed the fastest rise in service sector activity - the main driver for growth - in three years.

A similar survey by NTC research of the 12-member eurozone had growth at its fastest pace in four months.

Analysts expect the European Central Bank to raise rates to 3.5% this week.

A rate hike in the UK is not expected as imminently, but is forecast by most economists some time next year.

If economic growth runs too fast it can lead to a shortage of production capacity - pushing wages and prices up.

This tends to increase inflation, something that central bankers use higher interest rates to keep in check.

The service sector is the dominant driver of economic growth in the eurozone, and in the UK it accounts for about 75% of the total economy.


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