PARIS (Reuters) - French service sector activity stagnated in June as strike action weighed, although the flow of

new business improved, suggesting momentum could pick up in the months ahead, a survey showed on Tuesday.

Data compiler Markit said its purchasing managers index for services fell last month to 49.9 from 51.6 in May, dipping marginally below the 50-point threshold between an expansion and a contraction in activity.

The decline, which was unchanged from a preliminary reading, marked a retreat from the seven-month high seen the previous month.

"However, new business continued to grow and outstanding work accumulated for the fourth successive month, indicating that we could see a return to growth in business activity moving into the second half of the year," Markit economist Samuel Agass said.

Markit's composite PMI index, which includes the services and manufacturing sectors, fell to 49.6 in June from 50.9 in May, marginally better than the 49.4 originally reported.

Markit said some service providers reported that waves of strikes last month over a contested labor reform had weighed on output, adding to their troubles coping with weak client demand.

Meanwhile, service companies continued to cut prices while their input prices rose, mainly on higher wages, squeezing their margins.

(Reporting by Leigh Thomas; Editing by Hugh Lawson)