Euro zone services grew at a slower pace than expected in December, as the banking sector stalled, signaling a slowdown in the single currency area, a key survey showed on Monday.
"What we're actually seeing now is the services number, more domestically oriented, falling back," Philip Shaw, an economist at Investec, told "Worldwide Exchange."
"So it doesn't compensate for the strong euro, basically," Shaw added, referring to exporters' complaints that the single currency's appreciation has dampened their growth.
Yet as growth slowed, cost inflation remained close to a seven-year high in the dominant services sector, while prices charged accelerated, exacerbating a dilemma for the European Central Bank, which is expected to hold rates throughout 2008.
But in the light of the new data, the ECB may start thinking about easing starting with the second half of next year, Shaw said.
The RBS/NTC Flash Eurozone Services Purchasing Managers' Index fell to 53.2 in December from 54.1, its lowest since June 2005 and below economists' forecasts for a dip to 53.9.
Manufacturing growth cooled more modestly. The equivalent factory PMI slipped to 52.5, as predicted by economists, from November's 52.8.