The expansion in the vast U.S. services sector slowed slightly last month, suggesting growth in the world’s largest economy would remain modest, while activity in China’s services industry also waned.
Businesses in Great Britain and India also lost momentum in October, though Ireland saw its services sector grow at its fastest pace in five years, which some said suggests the struggling economy could outpace most euro zone peers in 2013.
A survey of the services industry in the 17-country euro zone is due on Tuesday.
In the United States, service firms saw a decline in new orders in October, which caused the Institute for Supply Management’s index to slip to 54.2 from 55.1 in September.
The data was the last to be released before Tuesday’s U.S. presidential election, which has been fought largely over the state of the U.S. economy and the pace of recovery. Polls had President Barack Obama and Republican challenger Mitt Romney in a dead heat on the eve of the vote.
The data “is an indication that we’re in a slowdown,” said Terry Morris, senior equity manager for National Penn Investors Trust Company. “We’ve seen some earnings come in pretty good, but there have been some disappointments. Demand remains low.”
The U.S. economy is expected to grow at around 2.0 per cent this year -- hardly robust but far more solid than the growth seen in Europe, where many countries are already in recession.
Joseph Trevisani, chief market strategist at Worldwide Markets in Woodcliff Lake, New Jersey, said the data suggested “moderate growth in the U.S. economy continues.”
Maintaining that level of growth remained crucial. Officials from the world’s 20 leading economies urged the United States to avert some $600 billion in automatic spending cuts and tax hikes due to take effect next year, warning it would hurt U.S. growth and the global economy.
China’s services sector expansion lost momentum last month as well, with the HSBC Purchasing Managers Index slipping to 53.5 after hitting a four-month peak in September. New orders fell and firms said higher competition squeezed margins.
That raised some concern since China’s services industry, which comprises banks, restaurants, Internet firms and others, had weathered the global slowdown better than its manufacturers.
However, services account for just 43 per cent of output, compared with well over 70 per cent in Western countries.
The good news: manufacturing surveys released last week showed the sector began gaining ground last month, a sign growth in the world’s No. 2 economy may be picking up.
“Despite the moderation of services activity growth, the Chinese economy is gradually bottoming out,” Hongbin Qu, HSBC’s chief economist for China, wrote in a note accompanying the report.
“We expect the continuation of policy easing to sustain the recovery in manufacturing sector in the coming months, which should lend additional support to growth of services sectors and consumer spending.”
A separate survey from China’s National Bureau of Statistics showed the service sector rebounded to 55.5 in October from a near two-year low the prior month, reflecting construction strength. The HSBC survey does not include construction.
But in India, the sector grew at its slowest pace in six months in October as weakness in the United States and Europe hurt orders and reduced hiring.
India’s service sector accounts for about 60 per cent of the economy and had been holding up until recently even as the economy grew between April and June at its slowest rate in nearly three years.
But Finance Minister P. Chidambaram told Reuters Sunday that full-year growth could slow to 5.5 per cent. That would be India’s most sluggish growth rate since 2002-2003, when the economy expanded by 4.0 per cent.
Business in Britain’s dominant service sector grew at the slowest pace in almost two years in October and optimism about the outlook waned.
Along with a deep contraction in manufacturing, that may condemn the U.K. economy to shrinking again between October and December after a surprisingly strong third-quarter expansion.
Irish service sector activity, however, grew at its fastest pace in five years, boosting hopes the small euro-zone economy would emerge from a rocky 2012.Report Typo/Error