Eurozone manufacturing turns as German output expands

(BRUSSELS) - Signs of recovery in the German manufacturing sector brought encouragement to the eurozone Wednesday with the downturn in industry easing, a key survey said.

A detailed reading on the seasonally-adjusted eurozone manufacturing Purchasing Managers' Index (PMI) produced by London-based Markit rose for the second month running in January.

The index hit a five-month high of 48.8, still below the 50.0 mark that indicates expansion in activity, although higher than first estimated -- thanks to Germany's climb to 51.0 and neighbouring Austria rising even higher.

Rates of contraction also eased in Italy, Spain and the Netherlands, Markit said.

"Euro area manufacturing has started 2012 surprisingly well, suggesting the region may avoid a slide back into recession," said Markit chief economist Chris Williamson.

However, IHS Global Insight's Howard Archer, also London-based, said business conditions remained "challenging."

The manufacturing sector "is still contracting in most countries, including France. And the rate of contraction remains substantial in Spain, Italy and, particularly, Greece," he noted.