Source: Markit

Growth of global service sector eased to five-month low in July. At 54.3 in July, the JPMorgan Global Services Business Activity Index signalled that the recovery in the world service sector had extended into a twelfth successive month. Growth of business activity remained broad-based by nation. However, the headline index fell further from its post-recession peak seen in April, to register its lowest reading in five months.

Rates of expansion in the US and India remained well above the global average, despite weakening over the month. The recovery in the UK service sector lost momentum, with activity rising at the slowest pace in over a year. Meanwhile, the Eurozone saw services output rise for the eleventh month running and the rate of growth accelerate slightly for the first time since May. Growth also picked up in the Chinese service sector.

Within the euro area, the recovery remained firmly centred on the core economies of France and Germany. Growth continued in Spain – but remained muted overall - - while Italy saw activity decline slightly for the first time in eight months.

Japan, Italy and Australia were the only nations covered to report a reduction in business activity in July. The rates of contraction were especially severe in Japan and Australia, accelerating to the fastest since February and May respectively.

The level of incoming new business increased for the eleventh successive month in July. The rate of growth was faster than June's five-month low, and slightly above the average for the current sequence of expansion, but well below those generally seen prior to the recession. New orders rose in the US, the Eurozone, the UK, China, India, Russia and Brazil, but fell sharply in Japan, Italy and Australia.

Backlogs of work were little-changed in July to levels seen one month ago. This followed modest growth in outstanding business in each of the preceding two months.

July saw service sector employment rise for the third successive month, reflecting job creation in the US, the Eurozone, Asia (excluding Japan), Brazil, Russia and Australia. Lower staffing levels were signalled for Japan, the UK, Italy, Spain and Ireland.

Cost inflationary pressure continued to abate in July. Having eased in each month since April's one-and-a-half year peak, the rate of increase in input prices was only moderate and the weakest since last October. Cost inflation was at a ten-month low in the US, weakest since February in the Eurozone, nine month low in the UK and also slowed in China and Brazil. Rates of inflation accelerated in India and Australia, while Japan and Ireland were the only nations to report lower costs.

Commenting on the survey, Joseph Lupton, Global Economist at JPMorgan, said: "The growth in the global service economy continued to moderate in July, according to the output component of the global services PMI. The lack of a spillover over from the past year's boom in manufacturing to the services sector has been surprising and we continue to believe that a more material recovery is in the offing.

The move back up in the new business component of the PMI gives some hint of this rotation, and the move back up in the services employment component was encouraging. Still, the levels remain low and a material rise will be needed in the coming months to signal that the recovery is broadening out in 2H10."