PARIS, Aug 5 (Reuters) - Business activity in France's services sector contracted in July at the fastest pace in four months and jobs were shed at a rate that equalled a record set in May, data showed on Wednesday.
The final Markit/CDAF services purchasing managers' index (PMI) fell to 45.5 in July from 47.2 in June. It was unchanged from a flash estimate published on July 24 and was at its lowest since March.
"The drop in July's services activity index serves as a reminder of the extent of underlying weakness in the French economy," said Jack Kennedy, economist at Markit.
"Barring a marked improvement from current levels, PMI data suggest that GDP may well remain mired in contractionary territory until Q4 at the earliest," he said.
The employment index matched the reading for May, which was the lowest since the survey began in 2006, indicating that service providers shed jobs at a record pace in July.
After hitting a 14-month high of 66.9 in June, the business expectations index for the services sector declined to 63.1 in July, up from a flash estimate of 61.4.
Despite the sharp drop, Markit said expectations remained well above the lows seen at the end of 2008 and the beginning of 2009, with some hopes of an end to the recession and forecasts of market revival expressed.
The composite PMI, which combines data for the services and manufacturing sectors, dropped to 47.3 in July from 47.8 the previous month. It was slightly higher than the July 24 flash estimate of 47.2.
The final manufacturing PMI, which was published on Monday, showed activity continuing a gradual move towards recovery in July. The survey showed the first increase in output and new orders in more than a year.
The final manufacturing PMI for July reached a 13-month high of 48.1 from 45.9 in June.
Markit said anecdotal evidence suggested the growth in new business was supported by client restocking and the launch of new products but it cautioned that companies still faced a very difficult environment.
Dragged down by the services sector, the new business component of the composite PMI for July remained in negative territory, unlike in manufacturing where the index indicated growth for the first time since May 2008.
Markit said that despite heavy price discounting and aggressive marketing campaigns, services firms generated less new business because underlying demand was weak.
The hotels and restaurants sector reported a particularly rapid fall in new business, confirming anecdotal reports widely publicised in French media that people were keeping a tight rein on spending during their summer holidays.
(Reporting by Estelle Shirbon; editing by Stephen Nisbet)