Overall business activity in the euro zone expanded at its fastest pace in nearly a year this month as a buoyant recovery in the bloc's dominant service industry more than offset a deeper downturn in manufacturing, a survey found.

HCOB's preliminary composite Purchasing Managers' Index (PMI), compiled by S&P Global, bounced to 51.4 this month from March's 50.3, well ahead of expectations in a Reuters poll for 50.7 and marking its second month above the 50 level separating growth from contraction.

"The euro zone got off to a good start in the second quarter. The Composite HCOB Flash PMI took a significant step into expansionary territory. This was propelled by the services sector, where activity has gathered further steam," said Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank.

The flash services PMI soared to 52.9 from last month's 51.5, ahead of all expectations in the Reuters poll which had a median forecast for a more modest rise to 51.8.

But the manufacturing PMI dropped to 45.6 from 46.1, confounding expectations in a Reuters poll for a lift to 46.6. It has been below 50 since mid-2022.

An index measuring manufacturing output did, however, nudge up to 47.3 from 47.1.

Indexes measuring demand also highlighted the division between the two sectors. The services new business index rose to an 11-month high of 52.1 but the manufacturing new orders reading fell to a four-month low of 43.8 from 46.0.

Overall, optimism remained strong and firms increased headcount at the fastest pace since June last year. The composite employment index rose to 51.8 from 50.9.

(Reporting by Jonathan Cable; editing by Christina Fincher)