"July's fall in the euro-zone composite PMI offers some early support to our view that the fragile recovery will slow in the second half of the year," Jennifer McKeown, senior European economist at Capital Economics said in a note.
"July's decline reflected falls in the manufacturing and service sector indices and follows yesterday's disappointing drop in euro-zone consumer confidence," she added.
July was a difficult month for the euro zone economy, with a financial crisis in Greece undermining confidence across the region, analysts said.
Markit, which compiled the PMI data, said earlier on Friday that its French preliminary PMI for the service and manufacturing sectors fell to 51.5 in July from 53.3 in June. The German PMI slipped to 53.4 from 53.7 in June.
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Still the headline euro zone PMI held comfortably above the 50-level that separates contraction from expansion.
It also contrasted with news from China, where PMI data published earlier on Friday showed manufacturing activity in the world's second biggest economy tumbled to a 15-month low in July.
U.S. PMI data is released later on Friday.