UPDATE 1-Euro zone services growth slows despite buoyant Germany

* Services and composite PMIs at 8-month lows

* Service sector backlogs of work falls

* Firms hire fewer new workers in October than month before

(Repeats to fix technical glitch)

By Jonathan Cable

LONDON, Nov 4 (BestGrowthStock) – Growth in the euro zone’s dominant
service sector lost steam last month as a slowdown in smaller
economies and a downturn in Spain outweighed an upswing in
activity in Germany, key private sector business surveys showed
on Thursday.

The Markit Eurozone Services Purchasing Managers’ Index
(PMI), which monitors the performance of thousands of companies
ranging from banks to hotels, fell in October to an eight-month
low of 53.3 from 54.1 in September.

While that was revised up slightly from a flash estimate of
53.2 and still well above the 50 mark that divides growth and
contraction, the survey showed activity was likely supported by
a reduction in backlogs of work.

“Activity actually improved in Germany and was pretty
buoyant, but elsewhere the situation was markedly less promising
… Spanish services activity worryingly contracted at the
fastest rate since last December,” said Howard Archer at IHS
Global Insight.

Financial markets did not show any reaction to the
revisions.

Earlier data showed French service sector growth slowed
dramatically last month and Italy’s ticked down as well. Spain’s
index slumped to 46.5 from 47.9 in September, its third straight
month below 50.

But in Germany, Europe’s biggest economy, the pace of growth
accelerated on stronger client demand and improved conditions in
the wider economy and this may continue.

The country’s Lufthansa (LHAG.DE: ) airline said last week it
expects business to remain strong next year [ID:nLDE69R07Y].
Earlier in October, Commerzbank (CBKG.DE: ), Germany’s
second-biggest lender, said it saw business in its strongest
unit going well [ID:nLDE69H17M].

The euro zone composite PMI, a broader measure of private
sector activity that combines both the services and the
manufacturing PMI which on Tuesday showed a fall, slipped to an
eight-month low in October of 53.8 from 54.1 in September.

The flash reading was slightly lower, at 53.4.

Survey compiler Markit said the composite PMI data suggested
quarterly euro zone economic growth of 0.3 percent, down from
0.6 percent in the third quarter and a peak of 1 percent in the
second quarter.

WORKING DOWN BACKLOGS

The report showed, however, that a significant contributor
to growth in the past month came from working down existing
orders rather than meeting new ones.

The service sector backlog of work index fell below 50 for
the first time since the start of the year, down to 48.8 last
month from 51.6 in September.

“The fact that this growth was partly achieved through
backlogs of orders falling for the first time in nine months
suggests that firms are struggling to maintain activity levels
in the face of weakened inflows of new orders,” said Chris
Williamson at Markit.

“If this continues, firms are likely to consider job cuts,
meaning employment in the sector could soon start falling
again.”

The composite employment index fell further last month,
slipping to 51.1 from September’s 51.4, indicating firms were
taking on new workers at the slowest pace since June.

Data released last week showed euro zone unemployment rose
to 10.1 percent in September from a downwardly revised 10
percent in August despite a fall in the number of jobless in the
euro zone’s biggest economy Germany. [ID:nBRLTLE685]

(For foreign exchange reaction click on [FRX/] and [USD/])

(For bond market reaction click on [GVD/EUR])

(For a guide to all PMI indices (PMI/INDEX1: ))

Detailed PMI data is only available under licence from
Markit and customers need to apply to Markit for a licence.

To subscribe to the full data, click on the link below:
http://www.markit.com/information/register/reuters-pmi-subscriptions

For further information, please phone Markit on +44 20 7260
2454 or email [email protected]
(Editing by Hugh Lawson)

UPDATE 1-Euro zone services growth slows despite buoyant Germany