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Euro zone growth slows more than forecast - PMIs
LONDON (Reuters) - Growth rates in the euro zone's services and manufacturing sectors slowed more than forecast this month as firms hired fewer new workers, surveys showed, offering fresh signs the region's economy recovery is losing momentum.
Markit said on Thursday its flash purchasing managers' index (PMI) data for September pointed to economic growth of 0.6 percent in the third quarter, down from the 1.0 percent pace in April-June that surprised markets when reported last month.
The Eurozone Flash Services PMI, compiled from surveys of around 2,000 businesses ranging from banks to restaurants, fell to 53.6 in September from 55.9 in August, its lowest reading since February.
The index, which has been above the 50.0 mark that divides growth in business activity from contraction for just over a year, came in well below the consensus forecast in a Reuters poll for 55.5, giving a boost to safe-haven German government bond prices.
But the service sector's business expectations index -- which gives an indication of how firms think the situation will be in a year's time -- rose to 68.1 this month from August's 67.1, its highest reading since April.
Economists were debating how worrisome the decline in the September figures was for the overall health of the 16-nation bloc of countries that use the euro.
The fall was driven by a slowdown in Germany even as French growth bucked the trend by holding strong.
"September's plunge in the euro zone PMI provides the strongest signs yet that the euro zone recovery is rapidly losing momentum," said Ben May at Capital Economics, who thought the figures pointed to a slower 0.4 percent growth pace in the third quarter.
Growth in the manufacturing sector, which drove a large part of the economy's revival in the third quarter of last year, eased to its slowest since January. The manufacturing PMI fell to 53.6 from 55.1, missing forecasts for 54.5.
The composite PMI, made up from the services and manufacturing sectors and often used to predict overall growth, sank to 53.8 this month from 56.2 in August, well short of expectations for 55.7.
Earlier data from Germany showed its pace of growth slowed much faster than expected. In neighbouring France the service sector also grew slightly more slowly than expected but manufacturing surprised markets by growing at a faster pace than had been predicted.
Figures released on Thursday by the national statistics institute INSEE showed morale in French industry picked up slightly in September as foreign orders improved, inventories rose and the general business outlook brightened.
NEW ORDERS SLOWING
The euro zone manufacturers' new orders index slumped from 55.3 in August to 52.8 in September, its lowest in a year, reflecting a slowdown in global trade in recent months. The service sector's new business index fell by a similar margin.
"New orders have fallen very sharply and in particular when you look at export orders, which are also moving down to the 50 level, the forward-looking elements of the survey are on the weaker side," said Ben Matthews at RBS.
Official data on Wednesday showed industrial new orders fell more than twice as much as expected month-on-month in July, pulled down by a slump in demand for capital and durable consumer goods.
The euro has also made steady gains against the dollar as fears about a slowdown in United States weigh on the greenback, making the bloc's exports more expensive.
Thursday's bullish service sector's business expectations index offered a sharp contrast to Germany's ZEW economic think tank's monthly poll which showed economic sentiment fell much more than forecast in September, suggesting the recovery in Europe's largest economy will lose momentum.
Worryingly for policymakers, the composite employment index, which dropped to 51.3 this month from 51.7, suggests that firms took on fewer workers than they did in August.
Unemployment held at 10 percent of the workforce for the fifth month running in July, near a 12-year high, and undermining household demand.
The euro zone escaped from its deepest recession in post-war history in the third quarter of last year but economists in a Reuters poll expect economic growth to slow to a crawl over coming quarters as austerity packages begin to bite, though the chances of the bloc slipping back into recession remain slim.
Median forecasts from the poll of around 70 economists predict the 16-nation bloc will grow by 0.2 to 0.4 percent each quarter through to the end of next year.
(Editing by Ruth Pitchford, John Stonestreet)
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