Global service sector growth eased at the end of 2018. December saw the rate of expansion of business activity ease to a three-month low as new order intakes rose at the slowest pace in over two years.

The J.P.Morgan Global Services Business Activity Index – a composite index produced by J.P.Morgan and IHS Markit in association with ISM and IFPSM – posted 53.1 in December, down from November’s four-month high of 53.7. The average index reading in the fourth quarter (53.4) was the weakest since quarter four of 2016.

Due to a later-than-usual release date, final data for the Japan Services PMI were not available to include in the global readings.

Sector data signalled that business activity increased across the business, consumer and financial services industries. The strongest performer was the latter, as financial services output rose at the fastest pace for five months. Activity growth slowed in both the business and consumer services categories.

The US remained one of the brightest spots for the global services economy, despite seeing its own rate of expansion ease to a three-month low. Output growth was also above the global average in China, Spain, India, Russia and Ireland.  

The main source of the slowdown was the euro area, where output growth was the weakest since November 2014. France contracted for the first time in 30 months, while growth in Germany eased to a 27-month low. The performance of the UK service sector also remained lacklustre, with output expanding at the second-slowest pace in the past two-and-a-half years. Similar national trends were also seen for new business, including a weakening of growth across the euro area to the lowest since December 2014.

December saw a further modest increase in global service sector employment, although the rate of job creation remained close to November’s 19-month low. Staffing levels increased in all of the nations covered apart from Brazil (where employment fell to the greatest extent since September).

Output charge inflation eased to a 12-month low in December. The rate of increase in input prices also slowed, as costs rose at the weakest pace since April. Increases in both price measures were stronger (on average) in developed nations compared to emerging markets. 

Commenting on the survey, David Hensley, Director of Global Economic Coordination at J.P.Morgan, said:

“The upturn in the global service sector slowed in December, following the weakest expansion of new order intakes in over two years. The financial services sector was a bright spot, seeing output growth accelerate to a five-month high, but this was more than offset by slower growth in both the business and consumer services industries. Conditions in the latter two will need to improve in the new year if the global service sector is to assist in a broader economic pick-up in 2019.”