A survey released on Wednesday showed that despite the eurozone recording its first increase in overall new orders since May last year in August, the region's economy continued to expand at a sluggish pace as slower services growth offset improvements in manufacturing output.

The HCOB Eurozone Composite Purchasing Managers' Index (PMI), compiled by S&P Global, rose marginally to 51.0 in August from 50.9 in July, reaching a 12-month high but still indicating only modest economic growth. The index's threshold of 50.0 serves as the dividing line between economic expansion and contraction.

Although export orders declined at their fastest pace since March, domestic demand offset this impact, enabling overall new orders to grow for the first time since May last year, albeit weakly.

Among major eurozone economies, Spain remained the best performer despite some slowdown in growth, followed by Italy, which saw a slight acceleration in economic growth. Germany's economic expansion pace slowed, while France remained in contraction territory, though its PMI rose to 49.8, the highest level in 12 months.

"Riding a bicycle too slowly can lead to a fall, and that's the risk the eurozone faces," said Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. "True, the economy has been growing since the beginning of the year, but at a painfully slow pace."

"Political tensions in France and Spain, uncertainty over EU-US trade agreements, and the ongoing struggles in the crucial automotive industry are doing the economy no favors."

The EU and US reached a framework trade agreement at the end of July, but only 15% of benchmark tariffs have been implemented so far.

Services, the dominant sector in the eurozone economy, saw growth slow to weak levels: the services PMI fell to 50.5 in August from July's four-month high of 51.0.

Manufacturing provided a bright spot: output in the sector achieved its strongest growth in nearly three and a half years in August, offering a glimmer of hope amid the overall economic malaise.

Overall employment growth accelerated to its highest level in 14 months, with services companies expanding their workforce while manufacturing firms continued to cut jobs.

However, price pressures intensified in August: input costs rose at their fastest pace since March, and companies raised their product prices by the largest margin in four months, potentially complicating the European Central Bank's (ECB) inflation outlook.

Eurozone overall inflation rose modestly to 2.1% in August, close to the ECB's 2% target, which may further reinforce market expectations that interest rates will remain unchanged in the near term.

Business confidence showed little change compared to July and remained below long-term averages, indicating that companies maintain a cautious stance toward future growth prospects.