French services activity strongest in March since Jan 2012: PMI

France's services sector returned to growth in March, posting the fastest rate of expansion since January 2012, a survey showed on Thursday, adding to signs that the euro zone's second-biggest economy is on the mend.

Data compiler Markit said its purchasing managers index for the services sector rose in March to 51.5 from 47.2 in February, fractionally better than a preliminary reading of 51.4.

It is the first time since October that the index has risen above the 50 mark dividing expansions in activity from contractions.

Markit's composite PMI index, which includes the services and manufacturing sectors, rose to 51.8 from 47.9 in February, marginally better than the 51.6 originally reported.

"Tentative signs of improving demand and confidence seem to be supporting the firmer trend," Markit economist Jack Kennedy said.

"But we need to see some consolidation in the coming months before firms will be sufficiently encouraged to invest more and begin hiring to any real extent," he added.

Service companies saw new business grow at the fastest pace since September 2011 as they cut prices further in March, which likely pinched their margins as input prices rose.

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(Reporting by Leigh Thomas; Editing by Hugh Lawson)