Business activity in the eurozone continued to expand in May owing to growth in the services sector, as manufacturing output declined for the fourth straight month, data from IHS Markit showed.

The final eurozone Composite Output Index ticked up to 51.8 in May from 51.5 in April, exceeding the preliminary reading of 51.6. The final Eurozone Services Business Activity Index stood at 52.9 in May, ticking up from April's 52.8 and beating estimates of a decline to 52.5.

Incoming new business rose and backlogs of work fell for the third straight month in May. Employment recorded a "solid rise," the survey noted.

Within the bloc, business activity in Germany improved more than expected, as the Composite Output Index rose to 52.6 in May from 52.2 in April owing to a softer fall in manufacturing output. The flash estimate and the Econoday consensus expectations were a 52.4 reading.

Meanwhile, the French Composite Output Index came in at 51.2 in May, up from 50.1 in April. The latest reading missed the preliminary and Econoday estimates of 51.3, but still indicated the fastest rise in output since November 2018.

Business confidence in the bloc remained subdued in May, with German businesses being the least confident of expansion in the coming year.

"Despite output at goods and service providers collectively rising at a slightly faster rate in May, the survey data are merely indicating a modest 0.2% rise in GDP in the second quarter," said Chris Williamson, chief business economist at IHS Markit.