Euro zone businesses floundered in March and growth cooled in the service sectors of the United States and India, taking some steam out of the global economy.

Other data on Wednesday showed private U.S. employers added more than 200,000 jobs last month, suggesting the recent improvement in the labour market was intact.

And while the survey data on euro zone businesses further cemented the view the region is in recession, it also showed companies became more confident that better times lie ahead.

Markit's Eurozone Composite Purchasing Managers Index (PMI) - a gauge of activity in firms ranging from factories to restaurants - edged down to 49.1 in March, slipping further below the 50 mark that divides growth from contraction.

The reading has now fallen in six of the last seven months and survey compiler Markit said the report probably consigned the euro zone to recession, defined as two consecutive quarters of contraction in gross domestic product.

At the same time, Markit's euro zone services PMI edged higher to 49.2 and was a little less gloomy than a preliminary reading had showed. Also, firms sounded more upbeat about the future, with business expectations at an eight-month high.

(The data) suggests that the first quarter of 2012 was not as bad as the final quarter of 2011, said economists Janet Henry, European economist at HSBC.

The strength of service sector business confidence raises hope for a future recovery.

Europe, plagued by a sovereign debt crisis, has become one of the global economy's weakest links. JPMorgan's Global Output Index, a measure of private sector business activity worldwide, fell in March to 54.6, pointing to more modest growth.

Compared to the euro zone economy, the United States is charging ahead although growth remains lackluster.

The U.S. Institute for Supply Management said its services index fell to 56.0 last month, missing economists' forecasts yet still pointing to growth.

We think it's consistent with the current tone of economic activity and points to (economic) growth of about two percent, said Millan Mulraine, senior macro strategist at TD Securities in New York.

The services sector accounts for about two-thirds of U.S. economic activity.

Still, the ISM's employment index improved last month, bolstering expectations the country posted steady job growth of around 200,000 in March, although perhaps not enough growth to bring down the lofty 8.3 percent jobless rate.

The ADP National Employment Report, which showed a bigger-than-expected 209,000 jobs were added in the private sector last month, also kept in place expectations the government's more comprehensive labour market report for March would show steady job growth when published on Friday.

Wednesday's data was overshadowed on Wall Street as investors focused on Tuesday's comments from the Federal Reserve, which suggested further monetary stimulus for the economy was unlikely. U.S. stocks were down about 1 percent.


In India, services growth slipped to a five-month low in March as business confidence faded to its weakest since 2009.

The HSBC Markit Business Activity index fell sharply to 52.3. Growth of new business, which had powered the modest rise in activity until now, eased and future expectations dipped.

And looming over the global economic outlook, Europe's debt problems look far from over.

Spanish borrowing costs jumped at a bond auction on Wednesday, jolting European markets, as this week's tough budget failed to calm investors' nerves about the country's finances.

The upturn in euro zone business expectations coincided with a new tranche of three-year loans given to banks by the European Central Bank in February, worth more than half a trillion euros.

But some euro zone countries are clearly doing better than others. Activity held essentially unchanged in France, while it picked up slightly in Germany.

The (euro zone) downturn is currently only very mild ... with gross domestic product probably falling by just 0.2 percent in the first quarter, said Chris Williamson, Markit's chief economist.

That tallies with a Reuters poll of economists taken two weeks ago, which projected the euro zone economy would stagnate in the second quarter.

The UK services PMI, by contrast, taken together with manufacturing data earlier this week that also showed a better performance than the euro zone, suggested Britain's economy expanded by 0.5 percent in the first quarter, Markit said.

Given that there are no concrete plans to stimulate growth in debt-ridden Europe, the onus remains firmly on the United States and developing nations such as China and India, which are slowing, to carry world economic growth.

(Writing by Ross Finley and Jason Lange; additional reporting by Ruby Cherian in Bangalore and Leah Schnurr in New York. Editing by Jeremy Gaunt and Chizu Nomiyama)