* US services sector expands in Dec, hiring up sharply
* U.S. employers add 155,000 jobs across economy in Dec
* Surveys suggest euro zone downturn is easing
* UK service sector declines, fourth quarter contraction
By Steven C. Johnson and Andy Bruce
NEW YORK/LONDON, Jan 4 Business activity in the
United States perked up in the final month of 2012, surveys
showed on Friday, while hopes grew that Europe may be through
the worst of its economic slump.
Britain's vast services sector, however, contracted for the
first time in two years, suggesting the broader economy probably
shrank as well in the final three months of 2012.
The Institute for Supply Management said its index of U.S.
service firms grew at its fastest clip in 10 months in December,
boosted by a rise in new orders. The pace of hiring in the
sector hit a five-month high.
Throughout the U.S. economy, employers added 155,000 new
workers last month. Gains were distributed broadly, from
manufacturing and construction to health care, which economists
say suggests the economy would probably grow by about 2.0
percent in 2013.
"The overall tone was one consistent with modest economic
growth," said Joshua Shapiro, chief U.S. economist at MFR, a
global consulting firm based in New York.
The 17-country euro zone, on the other hand, probably closed
out the year in recession, though evidence that the pace of
contraction in the service sector had slowed suggested things
may be turning around.
"I think (the euro zone PMIs) are showing a decisive
bottoming-out of activity," said James Nixon, chief European
economist at Societe Generale.
"Now, the actual levels of the surveys are still consistent
with GDP declining, but at least things aren't getting worse any
According to financial information firm Markit, the euro
zone's composite PMI, which measure the activity of thousands of
companies, rose to 47.2 last month, its highest since March.
The decline eased among firms such as banks and restaurants,
which comprise the bulk of the euro zone economy, though things
looked worse for manufacturers.
"The surveys at least bring some substance to the belief
that the worst is over and that a return to growth is in sight
for the region in 2013," said Chris Williamson, chief economist
The UK services PMI, however, slipped to 48.9 from 50.2,
sagging below the 50 mark that divides expansion and contraction
for the first time in two years.
"The broader picture is that for some time the economy has
been bouncing around the bottom ... and I think this is likely
to stay with us for the next couple of quarters," said Rob Wood,
chief UK economist at Berenberg Bank.
Survey compiler Markit said the figures suggest Britain's
economy shrank 0.2 percent in the final quarter of 2012, a
slightly bigger drop than most other private-sector forecasts.
HOPES PINNED ON CHINA, U.S.
Friday's European data followed news that China's services
sector saw its slowest rate of expansion in nearly a year and a
half in December, although the HSBC services PMI still pointed
to a modest revival in economic growth.
Fears that China's economy would hit the skids kept
investors on their heels in early 2012, but data in the second
half of the year suggested the world's second biggest economy
would avoid a hard landing and continue to grow modestly.
With Europe likely to remain in recession, the world economy
will increasingly depend on China and the United States to
provide the fuel for continued growth.
Recent U.S. data, particularly form the labor market, has
been encouraging, not least because firms continued to hire in
December despite a looming government budget crisis that many
feared would bring on recession in 2013 if not solved.
"This supports the view that the economy is picking up steam
and employers added to payrolls even with worries about the
fiscal cliff," said Andrew Wilkinson, chief economist strategist
at Miller Tabak & Co in New York.
A last-minute deal to avoid going over the U.S. "fiscal
cliff" of tax hikes and spending cuts was struck on New Year's
day by Congress, though decisions on some important spending
issues were delayed rather than decided.
In addition, minutes from the last Federal Reserve policy
meeting published on Thursday showed some officials were worried
about the risks associated with the central bank's open-ended
asset buying program, known as known as quantitative easing, or
Bond investors took that to mean the program, which has
suppressed long-term interest rates, could end sooner than
expected, prompting a brief spike in yields.
But payrolls data on Friday, which showed the jobless rate
ticked up slightly to 7.8 percent, eased some of those fears.
"When is comes to Fed policy, this report should keep it
steady," said Tom Porcelli, chief U.S. economist at RBC Capital
Markets. "There was talk of a scaling back of QE yesterday, but
this number is a snapshot and is basically where it was when the
Fed decided to do more QE last month."