Services PMI shrinks first time in over two years

The seasonally adjusted HSBC Markit Business Activity Index, based on a survey of around 400 firms, plunged in September to 49.8 — its lowest reading since April 2009 — and below the 50 mark which separates growth from contraction.

The index was at 53.8 in August. “The slowdown in growth has continued to broaden with the service sector seeing a further slowdown in economic momentum,” said Leif Eskesen, economist at HSBC.

Emerging economies like China and India that have been offshore hubs for companies in the west are feeling the pinch as growth in new business has slowed and the expectations index declined sharply in September.

Service providers were less sure about next year as worries over a festering debt crisis in Europe deepened coupled with a possibility of another recession in the United States.

The new business sub-index sank to a 28-month low of 51.6 in September, down from 54.9 in August.

The weak expansion in new business — the main cause of the stagnation in activity — meant employment levels fell for a third consecutive month.

Despite harsh conditions firms were able to pass on rising input costs to customers, albeit at a slightly lower pace than in August.

“Inflation pressures remain firmly in place,” said Eskesen. “While both input prices and prices charged grew at a slower

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