NEW YORK/LONDON (Reuters) ? Private sector business activity in Europe and China declined sharply this month, and new claims for U.S. jobless benefits remained high, underlining fears that the global economy could lapse back into recession.
The euro zone's dominant service sector saw a shock contraction in September, its first in two years. Its manufacturing sector, which drove most of the bloc's recovery, shrank for the second month running, surveys showed on Thursday. For details, see
In the United States, new claims for jobless benefits fell last week, but the decrease was not enough to alleviate recession worries.
"This just adds to the plethora of bad news in recent weeks, and it is not good for the outlook," said Jacob Oubina, senior U.S. economist at RBC Capital Markets in New York.
Data from China showed once-booming manufacturing contracted for a third consecutive month, suggesting the world's No. 2 economy may not be able to provide much of a counterweight to slowdowns in Western economies.
The data from around the world emphasized Wednesday's message from the U.S. Federal Reserve. The central bank warned of significant risks to the already weak economy and launched a new plan to lower long-term borrowing costs, just hours after the Bank of England signaled it was ready to pump in more money.
The U.S. jobless claims report "gives more backing to the Fed's decision yesterday to provide more stimulation," said Rudy Narvas, senior economist at Societe Generale in New York. "The economy is chugging along near stall speed."
In other U.S. data, home prices edged up in July, according to the Federal Housing Finance Agency, while a gauge of future economic activity rose in August but still signaled weak growth.
In Europe, the Flash Markit Eurozone Services Purchasing Managers' Index (PMI), which measures business activity at thousands of firms from banks to restaurants, sank to 49.1 this month from August's 51.5, far below a consensus forecast of 51.0.
None of the 37 economists polled by Reuters had predicted that services activity would contract and this is the first time since August 2009 the index has been below the 50 mark that divides growth from contraction.
It was a similar picture in the manufacturing sector, which had driven a large part of the bloc's recovery. The factory index dropped to its lowest level in two years to 48.4, slightly below expectations of a fall to 48.5.
"The numbers are still consistent with some GDP growth, so it does not signal recession just yet," said Martin Enlund at Handelsbanken.
"That said, we are seeing a slow-motion train crash in the euro area, where credit contraction risks leading to a new recession by Christmas unless governments face up to the task swiftly and forcefully."
The new-business index for the service sector fell to 48.3 from 51.4 in August, the first contraction in more than two years. The backlogs of work index meanwhile showed that for a third consecutive month some activity was driven by firms running down old orders.
Wall Street tumbled about 3 percent in early morning trading, and European stocks were also hit by the weak data and the Fed's bleak outlook.
Euro zone leaders have come under fire for not acting fast enough in the fight to contain the debt crisis.
The International Monetary Fund warned on Tuesday that Europe and the United States could slip back into recession next year without bold action and forward-looking data suggested the situation was unlikely to improve anytime soon.
Finance ministers and central bankers of the Group of 20 leading nations were gathering in Washington for meetings of the G20 and the IMF.
Seven world leaders demanded Europe take more decisive action against its debt crisis, while a European Central Bank study warned the entire euro currency project was now in peril.
HSBC's China Flash PMI dipped to 49.4 from August's final figure of 49.9.
Economists and Chinese officials have widely predicted China's growth will slow, largely because of waning exports. The country, known as the factory to the world, is especially vulnerable to fading demand from the United States and Europe, its two biggest export markets.
In the face of rising inflationary pressures the central bank has tightened policy, but many economists say it will pause its year-long campaign to see how the global turmoil plays out.
(Additional reporting by Julie Haviv and Emily Flitter in New York; Editing by Padraic Cassidy)
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