LONDON, June 21 Reuters Euro zone business growth slowed sharply this month as demand fell for the first time since February, a survey found, with the bloc39;s services industry showing some signs of weakening while the downturn in manufacturing took a turn for the worse.

That was despite the European Central Bank delivering a widely telegraphed cut to interest rates earlier this month and expectations in a Reuters poll for two more reductions this year.

HCOB39;s preliminary composite Purchasing Managers39; Index, compiled by SP Global, sank to 50.8 this month from May39;s 52.2, confounding expectations in a Reuters poll for a rise to 52.5.

However, June marked a fourth month above the 50 level separating growth from contraction.

Is the recovery in the manufacturing sector ending before it began? The services sector continues to keep the euro zone afloat, said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

The overall new business index dropped to a fourmonth low of 49.2 from 51.6.

A PMI for the currency union39;s dominant services industry fell to 52.6 from 53.2. The Reuters poll predicted an uptick to 53.5.

But inflationary pressures eased, strengthening the case for further ECB interest rate cuts this year. The services output prices index declined to 53.7 from 54.2, its lowest reading in just over three years.

The ECB, which cut interest rates in June, may feel vindicated by prices data which signalled easing pressure in the euro zone39;s…