Euro zone data heralds slowdown but ECB talks tough

By Jan Strupczewski

BRUSSELS (Reuters) - Euro zone economic growth is clearly slowing, data showed on Wednesday, but while the European Central Bank noted this could ease inflationary pressure, it kept its hawkish stance of fighting price rises.

Economists said the remarks by ECB chief Jean-Claude Trichet meant he had no intention of quickly following the Federal Reserve, which surprised markets with a 75 basis point rate cut on Tuesday in a bid to stave off fears of a U.S. recession.

Growth in euro zone services, which generate more than two thirds of the single currency area's gross domestic product, slumped below forecasts this month to a rate not seen in over four years, figures from RBS/NTC showed.

Manufacturing growth remained unchanged from December, a positive surprise. But the survey showed order intake had barely risen, which economists said signalled no more than a modest expansion in industrial output in coming months.

"Today's figures bear out our view that the euro zone economy will see growth below the long-term average this winter," said Christoph Weil, economist at Commerzbank.

"To be more precise, we envisage figures of 0.25 percent for the fourth quarter of 2007 and the first quarter of this year, and 1.5 percent for 2008 as a whole," he said.

Trichet said that despite market turmoil, which is expected to curb growth in the 15 countries using the euro, the ECB would stick to its job of keeping price growth under control.

"In demanding times of significant market correction and turbulences, it is the responsibility of the central bank to solidly anchor inflation expectations to avoid additional volatility in already highly volatile markets," Trichet said.