Global Economy
Growth in global services accelerates to four-month high in July but order inflows slow
By Finfacts Team
Aug 4, 2011 - 4:41 AM

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Source: Markit

July saw the rate of expansion of the global services sector improve to a four-month high. The underlying trend in growth remained fragile, however, as the acceleration partly reflected a marked depletion of outstanding business. Inflows of new orders and employment continued to rise, but at slower rates than in June.

The JPMorgan Global Services Business Activity Index rose to 53.1, up from 52.2 in June, and has now remained above the neutral 50.0 mark throughout the past two years. Although faster than in the previous month, the rate of expansion was below the average for the current sequence of increase.

Growth of US non-manufacturing activity accelerated to a four-month high. Faster rates of expansion were also seen in the UK, India, Russia, Brazil and Hong Kong. Activity continued to rise in the Eurozone and China, but at a slower pace than in June.

Within the Eurozone, growth eased in the big-two nations of Germany and France, while Spain and Italy both reported lower levels of activity. Activity in Japan's service sector declined again, while the Australian service sector fell back into contraction territory after two months of growth.

Incoming new business has also risen throughout the past two years. However, July saw the rate of increase slip to the weakest since April and stay below its long-run average for the fourth month in a row. New business increased in all nations except, Italy, Spain, Japan and Australia. Growth of new work accelerated in the UK, India, Brazil and Russia. Hong Kong also reported an increase, following a slight decline in the previous month.

With growth of new work slowing further in July, service providers largely achieved the accelerated increase in activity through steeper reductions in outstanding business. Backlogs of work subsequently fell for the second month running and to the greatest extent since August 2009.

July saw service sector employment increase for the thirteenth month in a row. However, the rate of jobs growth was only modest and below the average for this period. The US, Germany, France, China, Russia, Brazil, Hong Kong and Australia all saw employment increase. However, jobs growth only accelerated in France and Brazil.

Upward cost pressures continued ease in July. The rate of input price inflation slowed further from February's near two-and-a half year peak to the least marked since July 2010. This reflected recent falls in the cost of a number of commodities.

The Global Report on Services is based on the results of surveys covering around 3,500 executives carried out in the USA by ISM, and in Japan, China, the UK, Germany, France, Spain, Italy, Brazil, India, Russia, Ireland and Hong Kong by Markit, in Australia by AiG, New Zealand by Business NZ and Mexico by HSBC. These countries together account for an estimated 80% of global service sector output.

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