* Euro zone service sector grows at weakest pace in 2 yrs
* UK services PMI suffers biggest drop in a decade
* Asian PMIs show slowing growth
By Jonathan Cable
LONDON, Sept 5 Global growth in services came to
a virtual standstill last month as new business all but dried
up, adding to fears that the world economy is facing another
Weak purchasing managers indexes (PMIs) from the euro zone,
China, India and Britain echoed surveys last week that showed
world factory output slowed in August. Data due later on Tuesday
are also expected to show U.S. services growth has slowed
That all chimed with comments on Saturday from World Bank
President Robert Zoellick, who said the global economy is
stepping into a "new danger zone" as growth slows and investor
"At near stall-speed growth rates, the US and Europe are
clearly vulnerable. Outright recession, however, needs a trigger
which, in our opinion, will remain absent," said Michala
Marcussen, head of global economics at French bank Societe
U.S. jobs numbers on Friday also came in worse than
expected, adding to worries about the world's largest economy,
and stock markets and the euro -- battered by its government
debt crisis -- continued to fall on Monday.
Growth in the euro zone's dominant service sector eased for
the fifth consecutive month in August, expanding at its weakest
pace in two years, as new orders in the private sector shrank
for the first time since August 2009.
Worryingly for policymakers, a persistent downturn among
smaller members of the 17-nation currency bloc is now spreading
to core economies like Germany that have long supported the
region's fragile recovery, the data showed.
Markit's Eurozone Services Purchasing Managers' Index (PMI)
nudged down to 51.5 last month from 51.6 in July, its lowest
reading since September 2009 but in line with an earlier flash
The index has been above the 50 mark that divides growth
from contraction for two years but Markit warned that unless
business conditions improve, the euro zone economy risks
contracting in the fourth quarter.
Other data last week confirmed German GDP grew just 0.1
percent in the second quarter, far slower than 1.3 percent in
the first three months of the year.
Activity in Britain's dominant services sector also slowed
at the fastest pace in a more than a decade in August, and
firms' confidence in future business weakened to a one-year low.
China's fledgling services sector, which accounts for less
than 45 percent of gross domestic product, grew in August at the
lowest pace on record, reinforcing signs that the world's
second-biggest economy is losing steam but there is little
possibility of a hard landing.
But China's HSBC PMI reading of 50.6 still implied annual
expansion of 8-9 percent for the services sectors, the bank said
in a note to clients.
"China's services sector is likely to see moderation, not
meltdown, in the coming months," said Qu Hongbin, China
economist at HSBC.
India's services sector grew at its slowest pace in more
than two years in August, throttled by feeble expansion in new
business as a faltering global economy and tight domestic
monetary conditions weighed.
Euro zone leaders have been battling to prevent a debt
crisis spreading from periphery members to some of the bloc's
bigger economies, while the U.S. has been fighting its own
demons of sluggish growth and impending tough austerity
measures, both of which have hit global markets.
Due at 1400 GMT, the PMI for United States' service sector,
which accounts for around three-quarters of the world's largest
economy, likely fell to 51.1 last month from July's 52.7.
Friday's data showed U.S. employment growth ground to a halt
in August, piling pressure on both President Barack Obama and
the Federal Reserve to provide more stimulus for the economy.
Obama will lay out a new jobs plan in a speech to the nation
on Thursday, and White House advisers said the jobs data
underscored a need for action.
They could strengthen the hand of officials at the Federal
Reserve who wanted to do more to help the sputtering economy in
The central bank, which meets on Sept. 20-21, cut overnight
interest rates to near zero in December 2008 and has bought $2.3
trillion in securities to inject cash into the economy.
In contrast, the European Central Bank has raised its key
lending rate twice since April, taking the refi rate to 1.5
percent. The worsening growth and debt concerns will prompt the
ECB to leave rates on hold until the final quarter of 2012, a
Reuters poll shows.
Similarly the Bank of England, which has held rates at a
record low of 0.5 percent for over two years, is not seen
budging on rates until the dying months of 2012.
(Additional reporting by Aileen Wang and Kevin Yao in Beijing,
Olesya Dmitracova in London and Sumanta Dey in Bangalore)