By Andy Bruce

LONDON (Reuters) - Euro zone business activity shrank at a slightly slower pace last month, but a chronic shortage of new orders means an economic recovery still looks some way off, business surveys showed on Wednesday.

Markit's Eurozone Composite PMI, which gauges how thousands of businesses across the region fare each month, rose in May to 47.7 from 46.9, unchanged from a preliminary reading.

Although the index improved for the second month in a row, it has been rooted below the 50 threshold that signals growth for all but one month since September 2011.

Survey compiler Markit said the figures suggest the euro zone's longest-ever recession will extend into the current quarter with a roughly 0.2 percent economic contraction.

"Policymakers and politicians will nevertheless seek solace in the fact that the rate of decline has now eased for two consecutive months, and that Germany is stabilizing," said Chris Williamson, chief economist at Markit.

"Downturns have also eased in France, Italy and especially Spain since earlier in the year."

Still, Williamson said it was hard to see what could drive a return to growth outright anytime soon, adding that stabilization is perhaps the best the euro zone economy will see in the next few months.

The recession has resulted in the highest unemployment rate in the euro zone's history, reaching 12.2 percent and leaving 19.4 million people out of work.

The PMI suggested there was little chance of that being reversed soon, as the composite employment index slipped to 47.2 in May, a three-month low, from 47.4 in April.

A dearth of new orders in the services sector, which accounts for the bulk of the private economy, means it is by no means certain the surveys will improve again next month.

The services PMI, which covers companies ranging from banks to caterers, ticked up to 47.2 in May from 47.0, but showed order books shrinking at a slightly faster rate.

The individual euro zone country PMIs released earlier on Wednesday showed services companies in all four of the bloc's biggest economies - Germany, France, Italy and Spain - suffered declining business activity last month.

Firms became less optimistic about the prospects for the coming year, which counters data last week showing that confidence in the euro zone economy grew more than expected in May.

The services business expectations index slipped to 54.2 in May, its weakest reading this year.

- Detailed PMI data are only available under license from Markit and customers need to apply to Markit for a license. To subscribe to the full data, click on the link below:

http://www/markit.com/information/register/reuters-pmi-subscriptions

For further information, please phone Markit on +44 20 7260 2454 or email economics@markit.com

(Editing by Hugh Lawson)

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