The service sector recovery is suffering as much as that in manufacturing, a raft of surveys across Asia and Europe suggested on Monday, intensifying concerns about the health of the global economy.
Purchasing managers’ indices indicated that the growth of services slowed sharply in the world’s largest economies, often falling to or below levels last seen when the global economy crawled out of recession in 2009.
Coming after extremely poor U.S. jobs figures on Friday and bad manufacturing data last week, Monday’s figures show private sector services - the most important sectors of advanced economies - are not sufficiently strong to prevent a global economic slowdown.
In China, competing indices of service sector output both showed growth slowing rapidly, although they do not give reliable indicators of just how fast the economy is cooling. The PMI compiled by HSBC and Markit, an economics consultancy, dipped to 50.3 in August from 53.5 in July, lower even than its trough at the height of the global financial crisis.
Although readings on PMI indices around 50 are often said to represent the boundary between growth and contraction, evidence from numerous countries disputes this.
Qu Hongbin, China economist at HSBC, said the Chinese results, though bad, were consistent with 8 to 9 per cent growth.
“Overall services sectors are set to slow as both credit and property tightening measures are filtering through,” he said, adding that “the still resilient consumer spending, suggests China’s services sector is likely to see moderation, not meltdown, in the coming months,” he said.
The other Chinese PMI index, compiled by the China Federation of Logistics and Purchase, dropped to 57.6 in August from 59.6 in July, confirming the slowing trend, if not the level of likely output growth.
In the euro zone, the service sector PMIs for August matched the downbeat initial estimates of two weeks ago, suggesting that the European services sector output growth had fallen to its weakest level since September 2009.
The 51.5 reading in August was down from 51.6 in July and suggested “economic growth in the third quarter is unlikely to improve on the 0.2 per cent seen in the three months to June”.
In the U.K., the services PMI plunged far more than expected with a larger monthly drop than at any time during the crisis, although the level at 51.1 was still well above the lows hit in early 2009.
The drop in both UK manufacturing and services PMIs put them in the territory of monetary policy loosening in the past.
Equivalent data would normally be published in the US on the same day, but it has been delayed a day by the labour day holiday.