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Euro zone services and manufacturing weaken

Euro zone services and manufacturing weaken
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The euro zone’s dominant service sector was effectively stagnant this month after two years of growth.

A survey of purchasing managers measuring activity of firms ranging from restaurants to banks, did however stay above the level that divides growth from contraction.

Another survey showed manufacturing activity in the euro zone shrank for the first time since September 2009.

The surveys point to flat quarterly GDP growth and adds to signs that an economic slowdown is spreading beyond the periphery and taking root in core members of the bloc, including Germany.

“There is a weakness in the core countries, Germany in particular. The euro zone is losing its main motor of growth,” said Chris Williamson at Markit, which carries out the surveys.

The euro zone composite Purchasing Managers Index held steady. That is a broader measure of the private sector which combines the services and manufacturing data.

The composite index is often used as a guide to growth and Markit said it was consistent with no quarterly growth in the current quarter.

Economists polled by Reuters earlier this month predicted growth of 0.3 percent this quarter.

Earlier data from Germany, Europe’s largest economy, showed its manufacturing sector grew faster than expected but growth in its service sector nearly ground to a halt.

In France the service sector unexpectedly picked up pace but factory activity declined for the first time in over two years.

The grim numbers come on top of fears that the United States, the world’s largest economy, will slide back into recession and after earlier flash data showed activity in China’s manufacturing sector shrank in August for a second month running.

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