The global economy looks increasingly likely to be heading into a serious slowdown, just as the highest inflation in a generation prompts central banks to aggressively reverse the ultra-loose monetary policy adopted during the pandemic to support growth, data showed on Friday.

Business activity in the United States, the world's largest economy, contracted for the first time in nearly two years this month, activity in the euro zone retreated for the first time in over a year, and growth in Britain was at a 17-month low, purchasing managers' surveys said on Friday.

In another ominous sign for the global economy, Japan's government is expected to sharply cut its forecast for domestic growth.

Meanwhile, China's strict COVID-19 lockdowns and Russia's invasion of Ukraine have further damaged global supply chains that had not yet recovered from the pandemic.

S&P Global on Friday said its preliminary - or "flash" - U.S. Composite PMI Output Index had tumbled far more than expected to 47.5 this month from a final reading of 52.3 in June. That was the fourth straight monthly drop and was driven by weakness in the services sector, which contracted enough to offset moderate growth in manufacturing.

With a reading below 50 indicating business activity had contracted, the report will feed the vocal debate over whether the U.S. economy is back in - or near - a recession after rebounding sharply from the downturn in early 2020 at the start of the COVID-19 pandemic.

"The preliminary PMI data for July point to a worrying deterioration in the economy," S&P Global Chief Business Economist Chris Williamson said in a statement. "Excluding pandemic lockdown months, output is falling at a rate not seen since 2009 amid the global financial crisis."

In the euro zone, business activity unexpectedly contracted this month due to an accelerating downturn in manufacturing and a near-stalling of service sector growth as burgeoning costs pushed consumers to cut back on expenditure, a survey showed.

S&P Global's flash Composite Purchasing Managers' Index (PMI) for the euro zone, seen as a good gauge of overall economic health, fell to 49.4 in July - the lowest since February 2021 - from 52.0 in June, well below all forecasts in a Reuters poll that had predicted a more modest dip to 51.0.

Businesses across the euro zone continued to report mounting inflation pressures and an acceleration in wage growth, even as the overall growth outlook becomes increasingly murky, the European Central Bank said on Friday, based on a survey of 71 major firms.

Inflation in the currency union was 8.6% last month, official data showed, and on Thursday the ECB raised interest rates by more than expected, confirming that concerns about runaway inflation now trump growth considerations.

The U.S. Federal Reserve, battling 40-year high inflation, is forecast to deliver another hefty 75 basis point interest rate hike at its meeting next week.

The Reuters poll gave median predictions of a 40% probability of a U.S. recession over the coming year and a 50% chance of one happening within two years, a significant upgrade from a June survey.

China and Japan remain exceptions by keeping monetary policy loose, a sign their economies - the second- and third-largest in the world - lack strength to offset the weaknesses in other parts of the globe.

CHINA SLOWDOWN

Worries over a global slowdown are casting a shadow over Asia's recovery prospects with factory activity growth slowing in Japan and Australia, keeping pressure on policymakers to support their economies.

Japan's manufacturing activity grew at the slowest pace in 10 months in July, its PMI survey showed on Friday, boding ill for an economy struggling to shake the wounds from the pandemic.

"July's PMIs suggest that the manufacturing sector is slowing as demand weakens, while the latest COVID-19 is starting to hit the services sector," Marcel Thieliant, senior Japan economist at Capital Economics, said on Japan's PMI.

Factory activity also slowed in Australia with the index falling to 55.7 in July from 56.2 in June, a separate survey showed on Friday.

China's economic growth slowed sharply in the second quarter, weighed by widespread COVID lockdowns and pointing to persistent pressure over coming months from a darkening global outlook.

The slowdown in the world's second-largest economy, as well as the fallout from aggressive central bank tightening, forced the Asian Development Bank to slash its growth forecast for the region on Thursday.

(Reporting by Jonathan Cable, Leika Kihara and Dan Burns; Editing by Sam Holmes, Susan Fenton and Andrea Ricci)