By Vicky Buffery
PARIS, May 6 (Reuters) - The pace of contraction in the French services sector eased for a second successive month in April, a key survey showed on Wednesday, but economic conditions remained extremely difficult, prompting firms to slash prices in a bid to attract customers.
The Markit/CDAF final services purchasing managers' index (PMI) reached its highest level in six months in April, rising to 46.5 from 43.6 the previous month.
The composite PMI -- which combines data from services and manufacturing firms -- also rose to 43.8 for the month, from a revised figure of 40.2 in March.
But the readings were still well below the 50 mark separating growth from contraction as firms continued to struggle in the face of a slowdown in global demand that set in after last year's financial sector meltdown.
"The (services) index remained at a level unmatched prior to the Lehman Brothers-related collapse of global economic activity in September 2008," Markit said.
"Panellists continued to report that overall operating conditions remained unfavourable and that falling new business had again negatively impacted on activity."
New orders to service providers fell for the seventh consecutive month, with hotels and restaurants bearing the brunt of the downturn as customers cut back on discretionary spending.
In an illustration of the trend, French hotel operator Accor said in April it had suffered a 9.6 percent drop in first-quarter sales, as weakening economies hurt demand for its hotels.
Some of the firms surveyed also reported cancellations of existing orders, contributing to another steep fall in work backlogs, Markit said.
In a sign that the severity of the economic crisis may be starting to ease, companies' future expectations moved further into positive territory, reflecting growing confidence that the worst has now passed.
The business expectations index for the service sector climbed to 58.3 in April from 51.9 previously, and Markit said 37 percent of respondents expected output to be higher in twelve months' time.
But in the short term, firms continued to make painful adjustments to cope with the difficult economic context, slashing prices to boost sales, and making further sweeping cuts to staffing levels.
April's output prices component showed prices falling for the eighth straight month, with the index hitting a record low of 38.1, compared with a reading of 38.4 in March.
The services employment index rose marginally to 41.0 from 40.8 in March, but still remained close to February's survey record low of 40.6, indicating a further steep contraction in the service sector workforce, Markit said. (Reporting by Vicky Buffery, Editing by Andy Bruce)