GLOBAL ECONOMY-Service growth gears down, stokes double-dip fear

* China services growth falls to 15-month low

* Euro zone services PMI also slips

* British services growth at 10-month low

By Ross Finley

LONDON, July 5 (BestGrowthStock) – Global services growth geared
down a notch in June, data showed on Monday, supporting the view
in financial markets that emerging and developed economies are
set to cool off through the second half of the year.

The reports followed a series of similar health-checks on
global manufacturing last week which told a similar story and
which together could stoke smouldering fears of a double-dip
recession in some developed economies.

China’s services sector growth slowed to its weakest in 15
months and the surveys showed a similar slowdown from heady
rates across Europe, where governments are taking the hatchet to
budgets and where consumer spending is already lacklustre.

“The euro zone debt crisis and an associated intensified
tightening of fiscal policy in a number of countries is having a
dampening impact on economic activity across the region,” said
Howard Archer, chief European economist at IHS Global Insight.

The reports followed news on Friday that the U.S. economy
shed 125,000 jobs in June, the largest decline since October,
showing the world’s largest economy is failing to accelerate on
its own as government stimulus fades.

World stocks have tumbled 13 percent over the past two
months on fears that the world recovery from the worst recession
in generations is faltering, although a U.S. market holiday left
them directionless on Monday.

HSBC said its Purchasing Managers’ Index (PMI) for China’s
services sector — which unlike most developed economies,
represents less than half of its output — fell to a 15-month
low of 55.6 in June from 56.4. [ID:nTOE661064]

Although that was well above the threshold of 50 that
separates expansion from contraction, the loss of momentum,
which was also evident in manufacturing, provided more evidence
that the Chinese government’s tightening campaign is biting.

A similar services index for the U.S., due for release on
Tuesday after the Independence Day holiday, is also expected to
slip. [ID:nN02267655]
For graphics on the PMIs and a “double dip monitor”, click on:

V or W?

A separate report showed British services growth slowed in
June, also held back by subdued new business and a record
monthly drop in confidence. [ID:nLDE6640LX]

The CIPS/Markit Services PMI fell for the third time in four
months and more than expected to 54.4, a 10-month low,
triggering widespread concern among analysts.

“It is a shockingly weak result for the proponents of a
V-shaped recovery in the UK,” said Lena Komileva, head of G7
market economics at Tullett Prebon.

“This is the beginning of a W-shaped scenario as the survey
clearly shows the recovery momentum has peaked.”

Markit also reported that its comparable euro zone services
PMI fell to 55.5 in June from a 33-month high in May, in part
thanks to a slowdown in orders for new business. [ID:nSLA2IE689]

While that was also at a level pointing to relatively strong
growth, most economists expect the quarter just ended to be the
peak for this year, with the Reuters consensus showing 0.3
percent quarterly growth for the remainder of this year.

European Central Bank President Jean-Claude Trichet said on
Sunday he did “not believe at all” that Europe was facing a
double-dip recession, maintaining that budget cuts would help
cement Europe’s economic recovery. [ID:nLDE6630A9]

But economists polled by Reuters three weeks ago, before the
latest global slowdown concerns intensified, were already
putting the chances of a double-dip recession in the euro area
at about one in four. [ECILT/EU]

Uncertainty over the health of the world economy has also
pushed back expectations for when major central banks in the
developed world will deliver their first interest rate hike from
ultra-low levels.

Wall Street dealers polled by Reuters on Friday expect no
Federal Reserve interest rate hike this year, although they only
ascribed a median 15 percent chance of a double-dip recession in
the U.S. [FED/R]

For a graphic on the European PMIs see:

Interactive graphic on the risks of a double-dip recesssion:

(Additional reporting by Alan Wheatley in Beijing; Editing by
Mike Peacock)

GLOBAL ECONOMY-Service growth gears down, stokes double-dip fear