Private-sector activity in the euro zone picked up less rapidly than first estimated in July, while businesses continued to cut their prices, an indication that the currency area won't soon emerge from a lengthening period of very low inflation.

Data firm Markit Tuesday said its composite purchasing managers index--which measures activity across both the manufacturing and services sectors--rose to 53.8 from 52.8 in June, a lower reading than the initial estimate of 54.0 but still a three-month high. The PMI for the services sector rose to 54.2 from 52.8. A reading above 50 indicates a month-to-month rise in activity. The measure is based on a survey of 5,000 businesses.

But despite that rebound from weak readings in May and June, businesses barely added to their workforces, while they continued to cut their selling prices, both indications that very low inflation isn't going away anytime soon.

Figures released Thursday showed the annual rate of inflation fell to 0.4% in July from 0.5% in June, its lowest level since October 2009 and far below the European Central Bank's target of just under 2.0%.

The ECB's governing council meets Thursday, but isn't expected to introduce any new stimulus measures, having cut its key interest rates and launched a new program of cheap loans to banks at its June meeting.

France remained the currency area's weak spot. Private-sector activity declined for a third straight month in July, but at a slower pace as the services sector returned to growth while manufacturing slipped deeper into contraction.

Economic growth ground to a halt at the beginning of the year as consumers tightened their belts and companies cut back on investment. In the first three months of 2014, the economy failed to grow on a quarter-on-quarter basis, following a 0.2% expansion in the final quarter of last year.

The PMIs suggest the economy has slowed since then.

By contrast, activity in Spain's services sector expanded at its fastest pace since late 2006 during July, with employment increasing for the fourth straight month as new orders rose.

With a similar survey released on Friday pointing to only a slight slowdown in manufacturing activity in July, the latest survey suggests Spain's overall economic performance continued to improve in the third quarter.

"Companies remained optimistic that these recent improvements will continue over the coming year," said Andrew Harker, an economist at Markit.

Spain's economy grew at its fastest quarterly pace in six years during the second quarter, with gross domestic product increasing by 0.6% from the three months to March. The revival of the Spanish economy--the euro zone's fourth largest--has been one of the more positive developments for the currency area over the past nine months.

Write to Paul Hannon at paul.hannon@wsj.com

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(END) Dow Jones Newswires

August 05, 2014 05:35 ET (09:35 GMT)

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