Rising demand adds to evidence world growth is picking up

Wed Sep 4, 2013 8:02am EDT
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By Jonathan Cable

LONDON (Reuters) - Euro zone businesses had their best month in over two years in August as orders increased for the first time since mid-2011 while growth in China's services sector hit a five-month high, underpinned by new orders and business optimism.

Pockets of weakness remain across the world, however. Data on Wednesday showed Indian services activity shrank in August at its quickest pace since the depths of the global financial crisis.

Italian services also contracted more than expected and the downturn continued in France.

"The advanced economies have clearly picked up, China is the exception among the major emerging economies but the other emerging economies are still struggling and India in particular," said Andrew Kenningham, senior global economist at Capital Economics.

Emerging economies are particularly vulnerable to a tightening of United States monetary policy, the International Monetary Fund warned in a note prepared for the Group of 20 meeting in St. Petersburg this week.

Markets are preparing for the Federal Reserve to begin slowing down its huge bond-buying program this month as the U.S. recovery remains on track.

The U.S. Institute of Supply Management is due to publish its PMI for U.S. services on Thursday and a Reuters poll predicted a dip to 55.0 from July's 56.0. A sister survey on Tuesday covering factories showed a surprise upturn.

Markit's Eurozone Composite Purchasing Managers Index (PMI) rose to 51.5 last month from 50.5 in July, its highest reading since June 2011. The headline figure was revised down a touch from a preliminary reading of 51.7.   Continued...

Customers push shopping trolleys on an escalator at the Bercy shopping centre in Charenton Le Pont, near Paris, August 29, 2013. REUTERS/Charles Platiau