LONDON — Service sector growth in major European and emerging Asian economies was uneven in May, surveys showed on Friday, with slowdowns in the euro zone and India but a strong upturn in Russia.
Purchasing managers indexes (PMIs), which measure the activities of thousands of companies around the world, showed growth in the euro zone's vast services sector sagged for the second month in a row.
While the surveys indicated a welcome easing of inflationary pressure in Europe, input prices surged in Russia and also in India, where the service sector expanded at its weakest pace in 20 months.
A confusing picture emerged from Friday's Chinese services PMIs. The private HSBC survey showed growth accelerating and input price growth hitting a six-month high, but a government survey showed slowing growth and price pressures abating.
On Wednesday, manufacturing PMIs had showed a broad-based cooling of growth in world factories, feeding fears that the world's main economic engines are cooling fast as richer countries cut orders.
"Putting the services and manufacturing readings together... I think the PMIs as a whole are sending a pretty clear signal that there's a slowing in growth taking place," said Malcolm Barr, economist at JPMorgan.
Overall, the PMIs suggested businesses are still feeling the disruption to supply lines caused by March's earthquake and tsunami in Japan, and the costs of the commodities boom earlier this year which are still filtering through emerging markets. US PMIs due later on Friday are expected to show a modest uptick in growth for the non-manufacturing sector, although the spotlight will be on non-farm payrolls that are expected to show a steep loss of momentum in the labor market.
Friday's Markit Eurozone Services PMI showed a fall in May to 56.0 from 56.7 in April, holding above the 50 mark that signifies growth for the 21st month.
It showed growing disparities between the euro zone's strong Franco-German economic core and debt-burdened strugglers like Spain, Ireland and Italy, whose service sectors edged closer to stagnation.
The euro zone economy's 0.8 percent quarter-on-quarter expansion estimated for the first three months could be as good as it gets for this year, said survey compiler Markit.
British service sector growth also slipped in May, although like the neighboring euro zone, there was an easing in the upturn of both input and output prices that will come as welcome news for central bankers.
Price pressures
No such easing was seen in the slowing Indian service sector, as input costs increased markedly despite a series of interest rate hikes aimed at stemming rampant price growth.
The HSBC Indian services PMI slipped sharply to 55.0 in May from 59.2 in April — a 20-month low.
"The easing momentum for business activity and new business is evidence that policy tightening and high inflation is filtering through to growth," said Leif Eskesen, chief economist for India & ASEAN at HSBC.
Russian service companies fared much better, with the PMI there hitting a 13-month high thanks to a faster increase in new contracts.
While input price inflation also rose, approaching recent highs seen at the start of the year, the Russian service sector looked in rude health.
"As opposed to manufacturing, the service sector surprised positively in May demonstrating broad-based growth in all sub-sectors and accelerating its expansion rate to above the long-term average," said Alexander Morozov, chief economist for Russia and CIS at HSBC.
In China, HSBC's services PMI showed a big jump to 54.3 last month from April's near record-low of 51.6, contrasting with muted gains seen in the manufacturing PMIs which have suffered from power shortages and thinning profit margins.
By contrast, the official government survey from the China Federation of Logistics and Purchasing showed a slight slowdown in May — to 61.9 from April's 62.5 — as well as easing inflation pressure.
"Both indices measuring input prices and service charge prices dropped last month. That is a good sign and may help reduce inflation pressures," said Cai Jin, a vice-president at the China Federation of Logistics and Purchasing.
-with reports from Reuters and GMANews.tv
