(Adds background, details on industry, services)
MEXICO CITY, Oct 24 (Reuters) - Mexico's economy shrunk in August by the most in five months as the service sector sank, casting a shadow over hopes of a robust recovery in Latin America's No. 2 economy.
Mexico's monthly economic activity index fell 0.17 percent in August compared with the prior month, the national statistics agency said on Friday.
The figure was below the downwardly revised 0.33 percent expansion in July and the biggest fall since March.
Services fell 0.24 percent on a monthly basis, marking their biggest drop since September 2013, while industry expanded 0.37 percent.
Economic growth wobbled early this year, as a harsh U.S. winter hammered American demand for Mexican factory exports and a tax hike dragged on consumer spending, but most analysts forecast a pickup in the second half of the year, with growth reaching 2.47 percent.
On an annual basis, economic activity rose 1.29 percent in the 12 months through August, compared to a downwardly revised 2.49 percent rise in July. (Reporting By Alexandra Alper Editing by W Simon)