THE eurozone may be on the road out of recession, business data shows, but more evidence is needed to say if Europe will soon cease to be a drag on the global economy.
A key survey of business activity switched back into growth in July for the first time for 18 months.
Markit chief economist Chris Williamson said on Wednesday: "The best PMI reading for one-and-a-half years provides encouraging evidence to suggest that the euro area could - at long last - pull out of its recession in the third quarter."
Recession in the eurozone is widely regarded as a main drag on global economic momentum.
This has been underlined recently by the big economies in the Group of 20, the Organisation for Economic Cooperation and Development and the International Monetary Fund.
European stock markets advanced on the upbeat data with London gaining 0.81 per cent and Paris up one per cent. The euro edged up to $1.3233.
The latest survey of sentiment among purchasing managers, the people responsible for buying materials and products for businesses, is a leading indicator.
The latest findings contrast with consumer gloom, largely a result of record high eurozone unemployment which is a lagging indicator of how the economy performed in past months.
The Markit Eurozone Composite Purchasing Managers Index logged 50.4 points, above the 50-mark signalling growth, and a bigger-than-expected rise according to analysts after posting 48.7 points in June.
The survey, which had given negative readings since February 2012, is closely watched as a reliable pointer to the trend of business activity.
Economists said cautiously that findings for July could be a sign that recession was on the wane.
The outcome, the fourth monthly rise in a row overall, was also marked by a two-year high logged in the manufacturing sector, which recorded 50.1 points, up from 48.8.
The rate of job losses eased, Markit said, while the feedback from star economy Germany showed that rising output there was at a five-month high level.
But the French economy, the second-biggest in the eurozone, still showed contraction although at a slower pace, giving a reading of 48.8, up from 47.4 in June.
Taken together, the data provides a "summer filip to policymakers," Williamson said, given political or financial turmoil in Italy, Cyprus, Greece and Portugal.
Williamson said that although manufacturing had led the revival, there were also "promising signs of stabilisation in the service sector, which hints at some much-needed upturns in domestic demand."
The services sector gave a survey reading of 49.6 points, up from 48.3.
Record eurozone unemployment is tipped to reach 12.3 per cent at the end of 2014 by the Organisation for Economic Cooperation and Development, with under-25s the hardest hit.
Williamson said that although jobs were still being lost, there was also "welcome news in that companies are cutting back on headcounts to a lesser extent than earlier in the year."
While cautioning that there have been "false dawns" before, Ben May of London-based Capital Economics said the eurozone economy appeared to be "on the mend and might perhaps soon exit recession."
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