By Jonathan Cable
LONDON (Reuters) - Business activity across the euro zone was lethargic last month, according to a survey which suggested a downturn in manufacturing is gradually infecting the bloc's dominant services industry.
IHS Markit's Euro Zone Composite Final Purchasing Managers' Index (PMI), considered a good measure of overall economic health, dipped to 51.6 in March from February's 51.9.
That was higher than an earlier flash reading of 51.3 but closer to the 50 mark separating growth from contraction.
"The final euro zone PMI for March confirms the sluggish end to the first quarter, with business growth ebbing to one of the most lethargic rates seen since 2014," said Chris Williamson, chief business economist at IHS Markit.
Williamson said the PMI was consistent with economic growth of 0.2 percent in the first quarter, weaker than the 0.3 percent predicted in a Reuters poll last month. [ECILT/EU]
Signs of a slowdown are likely to concern policymakers at the European Central Bank, who last month pushed back the timing of an interest rate rise until at least 2020 and said they would offer banks a new round of cheap loans to help revive the economy.
Factories had their worst month for almost six years in March, a sister survey showed on Monday, and while services activity notched up a tad last month it remained weak.
A services PMI rose to 53.3 from 52.8, ahead of the flash estimate of 52.7.
"The service sector has managed to sustain a relatively resilient rate of growth but has also lost momentum in recent months. This should come as no surprise as history tells us that robust service sector growth usually depends on a healthy manufacturing economy," Williamson said.
But like their manufacturing counterparts, firms in the service industry generated some of that activity by running down old demand. The backlogs of work index fell below the breakeven mark to 49.4 from 51.0, indicating firms are operating with spare capacity.
With forward looking indicators providing little -- if any -- reason to cheer, overall optimism waned. The composite future output index dropped to 60.4 from 60.6.
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(Reporting by Jonathan Cable; Editing by Catherine Evans; jonathan.cable@thomsonreuters.com; +44 20 7542 4688; Reuters Messaging: jonathan.cable.thomsonreuters.com@reuters.net)
