Agence France-Presse . Brussels

Eurozone business activity improved unexpectedly in February, according to a survey on Friday, although analysts warned that the economy was still losing momentum.

Provisional results for NTC Research's survey of business leaders in the 15-nation eurozone rose to 52.7 points in February from 51.8 points in January, halting a steady decline in the index.

The result exceeded economists' forecasts for the widely watched purchasing managers index to keep falling in February to 51.4 points. A reading below 50 points indicates contraction.

The overall improvement was driven by an upturn in the vast service sector, where the index rose to 52.3 points in February after it nearly slumped into contraction in January at 50.6 points.

However, manufacturing sector activity slumped to a four-month low of 52.3 points after 52.8 points in January. Economists said that although the overall improvement in business activity provided some rare relief about the eurozone's outlook, the economy was undeniably losing steam.

'Overall these data are stronger than we expected,' UBS economist Sunil Kapadia said. 'Nevertheless we continue to believe that the trend in these and other activity indicators is firmly downwards.' Likewise, economist Howard Archer with consultants Global Insight said: 'The 'flash' February service sector and manufacturing purchasing managers' surveys are firmer overall, which may dilute some of the pessimism.'

'Nevertheless, it is clear that the region's economy has lost substantial momentum in recent months,' he added. 'It still seems set for a difficult 2008 in the face of tighter credit conditions, a strong euro, elevated oil and commodity prices, softer growth in key export markets and higher interest rates.'

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