ROME (Reuters) - Italy's services sector shrank in July at its slowest pace since going into a downturn in the summer of 2011, a survey showed on Monday.
The data supports recent signs that recession in the euro zone's third-largest economy could be easing, with a sister survey for the manufacturing sector this week showing activity expanding for the first time in two years.
The Markit/ADACI Business Activity Index, covering companies from banks to hotels, jumped to 48.7 from 45.8 in June. That easily beat the average forecast of 46.5 in a Reuters survey of economists as well as the highest forecast of 47.0.
Markit economist Phil Smith said the data showed a bright start to the third quarter, but that job cuts and weak demand in the sector meant continued improvement was not certain.
Italy's awkward coalition of political rivals, rocked this week by the conviction of center-right leader Silvio Berlusconi for tax fraud, is straining to stimulate an economy mired in its longest post-war recession while keeping public spending under control.
Services make up around 70 percent of Italian gross domestic product, including public services not covered in the survey.
Employment in the private services sector declined for the 26th month running in July due to the most substantial job cuts since February as a result of reduced workloads, Markit's survey showed.
New business fell less than in the previous month and at the slowest pace since April, though the total period in which new business has declined stretched in July to its 27th month.
Prices charged by service providers fell to the greatest extent since November 2009, a marked drop linked by companies to attempts to boost client interest, Markit said.
Output prices have fallen on average in every month for the last two years, with the hotel and restaurant sector showing the steepest fall.
Reporting by Naomi O'Leary; Editing by Hugh Lawson