GLOBAL ECONOMY-Service sector spotlight shines on Germany, China

* China and Germany see upturn in service sector growth

* Spain’s service sector contracts, British growth lower

* U.S. service sector expansion seen slowing
(Updates with U.S. ISM non-manufacturing data)

By Jonathan Cable

LONDON, Sept 3 (BestGrowthStock) – Global service sector surveys
highlighted a growing divergence in economic recovery on
Friday, with a pick-up in growth in China and Germany but
slowdowns in Britain, Spain and the United States.

The data follows sister surveys earlier this week which
painted a similar picture for the manufacturing sector,
although signs of expansion in China and the United States
revived some investor confidence. [ID:nSGE68002V]

China’s service sector expanded at its fastest pace in four
months in August on the back of strong domestic demand, but the
headline figure was below the long-run average of the series.
[ID:nTOE68107E]

HSBC said its Purchasing Managers’ Index for Chinese
services, which account for much less of output than in more
developed countries, rose to 57.6 in August from 56.3 in July.

In the 16-nation euro zone, whose economy is heavily
weighted to the service sector, the pace of recovery was barely
changed in August from July but signaled a growing split, with
a pick-up in Germany — the region’s largest economy — offset
by Spain’s slide back into contractionary territory.

In the United States, the non-manufacturing sector grew in
August for an eighth straight month but at a slower pace than
July and at a rate that was below expectations.

Markit’s Eurozone Services Purchasing Managers’ Index for
the service sector, which accounts for roughly two-thirds of
the euro zone economy, nudged up to 55.9 in August from 55.8 in
July — a strong overall reading. [EUR/PMIS]

“The surveys highlight the uneven performance of the euro
zone economies, with Germany currently performing very well,
France decently, Italy growing modestly and Spain and Ireland
still struggling to develop recovery,” said Howard Archer,
chief European economist at IHS Global Insight.

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For a graphic see: http://r.reuters.com/ryz29n

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The bloc’s economy expanded 1.0 percent in the second
quarter over the first, the fastest pace in more than three
years, although it was a reflection of Germany’s resurgence.

Spain’s services PMI fell to 49.2, the first time the index
slipped below the 50.0 line that separates growth from
contraction since February. [ID:nSLA2KE6BI]

And Britain’s dominant service sector marked its slowest
growth last month since April 2009, with a marked fall in
hiring as employers worried about an economic slowdown and
public spending cuts. [GB/PMIS]

The headline Markit/CIPS services purchasing managers’
index dropped to 51.3 in August from July’s 53.1, a much
sharper fall than the decline to 52.9 forecast in a Reuters
poll.

Governments are turning their focus to slashing budgets as
they face up to paying off the billions of dollars pumped into
economies to drag them out of the worst post-war recession.

PAYROLLS FORECAST TO FALL AGAIN

For the United States, the Institute for Supply Management
said its index of national services activity fell to 51.5 in
August from 54.3 in July. That was below market expectations of
53.5.

The report’s employment component fell to 48.2 from 50.9,
while new orders dipped sharply to 52.4 from 56.7, suggesting a
slowdown in the sector.

But the U.S. government’s closely watched monthly report on
nonfarm payrolls painted a more optimistic picture of the labor
market, even though employment fell for a third straight month
in August.

The Labor Department reported nonfarm payrolls declined by
54,000, well below market expectations of a drop of 100,000.
And private employment, considered a better gauge of labor
market health, rose by 67,000, compared with expectations of a
rise of only 41,000 in August.

The unemployment rate, however, inched higher in August, to
9.6 percent from 9.5 percent in July.[ID:nN02227856]

“In the euro zone there is not at the moment the risk of a
double dip, a risk that instead is present in the United
States,” Hans-Werner Sinn, president of Germany’s IFO economic
research institute, told reporters in Cernobbio, Italy.

But even though fears of a double-dip recession in the
United States persist, after the release of the U.S. jobs data,
which follows data this week that showed strength in
manufacturing and gains in consumer spending, economists in the
United States downplayed such a likelihood.

“It is inconsistent with fears that a sharp slowdown in the
economy is under way,” said Dean Maki, chief U.S. economist at
Barclays Capital in New York.

However, with unemployment stuck near 10 percent and the
impact of the government’s $862 billion economic stimulus
fading, investors worry that the U.S. economy may face a period
of near-stagnation even if it avoids a double-dip recession.

U.S. growth braked to a 1.6 percent annualized rate in the
second quarter after a brisk 3.7 percent in the first quarter.

The big question is whether Asia and Europe’s biggest
powers could carry on prospering or would inevitably be dragged
down by the world’s largest economy, whose markets they still
heavily rely on for export demand.
(Additional reporting by David Milliken and Andy Bruce in
London, Alan Wheatley in Beijing and Nigel Tutt in Milan, ,
editing by Mike Peacock and Paul Simao)

GLOBAL ECONOMY-Service sector spotlight shines on Germany, China