Global PMI rises but service sector still struggles

LONDON, June 3 (Reuters) - Global business activity contracted at its slowest pace in eight months in May as an accelerated downturn in services activity was offset by an upturn in the manufacturing index, JP Morgan said on Wednesday.

The Global Total Output Index, produced by JP Morgan with research and supply management organisations, rose to 44.0 in May from 43.2 in April, staying solidly below the 50.0 mark that divides growth from contraction.

"The improvement is being driven by the manufacturing sector, which posted precipitous output declines in the fourth quarter 2008 and the first quarter 2009," said David Hensley, a director at JP Morgan, in a press release.

The global service sector indicator shrank at a faster pace and remained in negative territory for the 12th consecutive month, sliding to 43.2 in May from 43.7 the previous month.

JP Morgan said in a press release the index was pulled down by Spain and Australia which saw the fastest rate of decline in May. Earlier data showed the 16-nation euro-zone's dominant service sector contracted sharply again in May, but the region's PMI rose to a seven-month high, while in the UK the service sector staged a surprise return to growth -- its first time above the 50-mark since April 2008. The U.S. service sector, which represents about 80 percent of activity in the world's largest economy, also contracted less severely in May, with the index edging to its highest since October.

The index combines data from countries including the United States, Japan, Germany, France, Britain, China and Russia.

(For a TABLE see [ID:L337403])

(Reporting by Jonathan Cable; editing by Patrick Graham)