LONDON (Reuters) – Euro zone business activity expanded last month for the first time since May 2023 but the recovery was uneven with a stronger than expected upturn in the bloc’s dominant services industry offsetting a deeper downturn in manufacturing, a survey showed.

HCOB’s composite Purchasing Managers’ Index (PMI) for the currency union, compiled by S&P Global and seen as a good gauge of overall economic health, climbed to 50.3 in March from February’s 49.2, improving on a preliminary 49.9 estimate.

That bounce moved the index back above the 50 mark separating growth from contraction.

“Finally some good news again. The service sector in the euro zone is gradually finding its footing, with activity stabilizing in February and showing signs of moderate growth in March,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

The services PMI jumped to 51.5 from 50.2, above the flash estimate of 51.1 and its highest reading since June.

That comes after a sister survey released on Tuesday showed the downturn in manufacturing deepened last month although it did show some tentative signs of recovery.

Demand for services increased with the new business index moving above breakeven to 51.4 from 49.8.

“It’s particularly encouraging to note that new business has resumed growth after an eight-month dry spell. This favourable trend is expected to persist, fuelled by wage growth outpacing inflation, thus bolstering the purchasing power of households,” de la Rubia added.

With the services industry returning to growth overall optimism about the year ahead soared. The composite future output index leapt to 61.8 from 60.5, a level not seen in over two years.