GLOBAL ECONOMY-Recovery on track but slows in November, U.S. data shine

Reuters

* U.S. trade deficit narrows, private employers add 215,000jobs in November

* PMI surveys point to divergence in euro zone recovery

* Chinese growth slow but steady

By Rodrigo Campos and Jonathan Cable

NEW YORK/LONDON, Dec 4 (Reuters) - Service sector activityexpanded around the world in November, albeit at a slower rate,while strong U.S. data housing and jobs figures brightened theoutlook for growth, data showed on Wednesday.

Sales of new U.S. single-family homes recorded their biggestincrease in more than three decades in October, and private jobcreation rose by the most in a year last month. The U.S.services sector expanded, though the pace of growth slowed lastmonth with employment and business activity expanding at lowerrates.

The initial U.S. market reaction to the strong jobs datareflected concern over a possible reduction in asset purchasesfrom the Federal Reserve, a stimulus program that has boostedequity prices and has kept a lid on Treasury yields.

The upbeat housing data turned the stock market around laterin the session, and Wall Street shaved its initial losses.

"In the short term the market is still worried about themost inevitable thing in our lifetime, and that is tapering,"said Mike Serio, regional chief investment officer at WellsFargo Private Bank in Denver.

"However, this (jobs) number, we don't want to get tooexcited about it, but it truly was a pretty darn good number."

Private employers added 215,000 new jobs to their payrollslast month, the ADP National Employment Report showed, beatingeconomists' expectations for a gain of 173,000 jobs. October'sgain was revised to 184,000 from 130,000.

Financial data firm Markit said its U.S. compositePurchasing Managers Index (PMI) - a weighted average of itsmanufacturing and services indexes - rose to 56.2 last monthfrom 49.6 in October, while The Institute for Supply Managementsaid its services index fell to 53.9 last month from 55.4 inOctober.

U.S. data on services sector growth and overall privatesector activity followed numbers out of Europe and China thatpointed to steady growth in those regions in November.

Separate data showed U.S. exports hitting a record high inOctober

"This is an encouraging sign for both U.S. manufacturinggrowth and the state of global demand," said John Ryding, chiefeconomist at RDQ Economics in New York.

"There is marked acceleration in the imports of capitalgoods, which may signal a brighter picture for capitalspending," he said.

EUROPE GROWTH DISPARITY

A tepid expansion in the euro zone masked a growingdisparity among its key members last month.

A buoyant Germany was not enough to stop the 17-nation eurozone's private sector from losing momentum last month, as adownturn in France - the bloc's second biggest economy - and acontinued recession in Italy weighed on the region's pace ofgrowth.

Britain, which does not use the euro, also saw its rate ofgrowth slow, but November's figure was still solid enough toprovide a strong economic backdrop for a twice-yearly governmentbudget update due later this week.

"It's steady as she goes, but that's not a bad thing. We canlook forward to 2014 with a lot more optimism than at any timein the past several years because many of the shoes that we werewaiting to drop haven't," said Peter Dixon at Commerzbank. "Itcould be better but it could be a lot worse."

Markit's November Eurozone Composite Purchasing Managers'Index (PMI), which monitors activity at thousands of firmsacross both the services and manufacturing industries, slippedto 51.7 from 51.9 in October.

That did, however, mark an improvement on an initial readingof 51.5 for November and was the fifth straight month above the50 mark that divides growth from contraction.

The euro zone services output price index also showedinflation pressures easing, dropping to 47.9 from 48.5.

"Although we expect the ECB to keep its remaining monetarypowder dry tomorrow, President Mario Draghi is likely toreaffirm the ECB's easing bias, for example, by reiterating thatthe region may experience a prolonged period of low inflation,"said Martin van Vliet, an economist at ING.

Britain's services PMI fell to a still very strong 60.0, itsfifth highest reading since December 2006 - and all of thebetter ones have been since June this year.

In a further indication of strength, China's HSBC/Markitservices PMI stood little changed at 52.5 in November, althougha moderation of new business and prices-charged growth suggeststhe underlying momentum has started to soften.

Beijing has embarked on a sweeping restructuring drive andworld's second biggest economy has regained some momentum sincemid-year after a protracted slowdown.

Any positive news will reinforce the government's hand as itpushes ahead with an ambitious agenda of reshaping the economyto boost domestic consumption at the expense of the traditionaldrivers of exports and investment.

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