LONDON - The decline in euro zone business activity eased this month as the bloc's dominant services industry bounced back to growth and offset a long-running contraction in the manufacturing industry, a survey showed on Monday.

HCOB's preliminary composite euro zone Purchasing Managers' Index, compiled by S&P Global, rose to 49.5 in December from November's 48.3 but was still shy of the 50 mark separating growth from contraction.

A Reuters poll had predicted a fall to 48.2.

"The end of the year is somewhat more conciliatory than was generally expected. Service sector activity returned to growth territory and is showing a noticeable, if not exuberant, pace of expansion, similar to that seen in September and October," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

An index measuring services bounced back to 51.4 from 49.5, confounding expectations in the Reuters poll for no change from November.

But suggesting firms do not expect an imminent improvement in activity, they kept headcount broadly steady with the services employment index slipping to 50.1 from 51.0.

The factory PMI, which has been sub-50 since mid-2022, held steady at November's 45.2, just below the poll forecast for 45.3. An index measuring output, which feeds into the composite PMI, dropped to 44.5 from 45.1.

"The manufacturing sector's situation is still pretty dire. Output fell at a quicker pace in December than at any other time this year, and incoming orders were down too," de la Rubia added.

Indicating no recovery anytime soon, demand for goods manufactured in the euro zone waned further and the new orders index slipped to 43.0 from 43.4.

However, overall optimism improved. The composite future outlook index climbed to a four-month high of 57.8 from 56.1.

(Reporting by Jonathan Cable; Editing by Toby Chopra)