The eurozone economy is showing signs of recovery from recession, with a key economic indicator released Tuesday rising to a 10-month high in January following a strong pickup in Germany.
The London-based research group Markit said its Purchasing Managers' Index (PMI) for the 17-member eurozone's manufacturing and service sectors rose to 48.6 points last month compared with 47.7 in December.
This took the indicator closer to the key 50-point reading, which marks economic expansion.
It is also above Markit's preliminary estimate of 48.2, which was released earlier this year. The indicator is based on a survey of about 5,000 companies from across the currency bloc.
The release of the PMI is likely to add to hopes that the worst might now be over for the eurozone after the region's economy slumped into recession last year.
"The eurozone is showing clear signs of healing, with the downturn easing sharply in January and the region moving closer to stabilization in the first quarter," said Markit chief economist Chris Williamson.
Driving the survey was a strong gain in the PMI for the eurozone's biggest economy, Germany, which jumped to a 19-month high of 54.4.
Underscoring the growing strength of the German economy, the VDMA association representing the nation's mechanical engineering sector released figures on Tuesday showing new orders jumped by 4 per cent in December compared with the same month in 2011.
But the pickup in Germany's PMI was offset by a sharp fall in the reading for France, along with continued downturns in Italy and Spain. Both Italy and Spain have emerged at the centre of the long-running debt crisis.
At 42.7, France's PMI is at its lowest level for 46 months.
"Growth is heavily skewed towards Germany, however, where the contrast with the contraction seen in France is the greatest seen since the survey began in 1998," said Williamson.
But while the indicator for Italy slumped to a two-month low of 45.4, Spain recorded its highest reading in 19 months at 46.5.
As a reminder, however, of the fragile state of the eurozone economy, the European Union statistics office Eurostat said retail sales fell more than forecast in December, slumping month on month by 0.8 per cent after declining 0.1 per cent in November.
Year on year, sales dropped 3.4 per cent in December amid a sharp contraction in retail trade in Spain and Portugal.