Euro zone services PMI dips as upturn stumbles

By Jonathan Cable

LONDON (Reuters) - Signs of a recovery in the euro zone's dominant service sector took a backwards step in June but business optimism hit a near two-year high on hopes the worst is over, key surveys showed on Friday.

Markit revised up its Eurozone Services Purchasing Managers Index in June to 44.7 from the flash estimate of 44.5, but this was down from May's 7-month high of 44.8.

Economists had expected 44.5 and this marks the thirteenth consecutive month the index has been below the 50.0 mark that divides growth from contraction.

"The services PMI data for June round off the second quarter on a disappointing note, fuelling concerns that the recent easing in the rate of contraction has lost momentum," said Chris Williamson at data provider Markit.

"Hopes of a swift return to stability for the euro zone have been dealt a blow by these numbers."

There was evidence of divergence in the big four economies in the region.

Earlier data showed activity in Germany's private sector contracted at the same pace as in May, while in France and Spain the sector contracted at a slower pace. The rate of contraction accelerated in Italy.

However, firms ranging from banks to restaurants were optimistic and the business expectations index rose to 62.3 from May's 59.1, a level not seen since July 2007.