The eurozone's private sector surged ahead this month, according to a survey released on Thursday, confounding expectations for a slowdown in growth and further quelling concerns about a double-dip recession.
Both the services and manufacturing sectors saw the pace of growth accelerate and firms took on more workers but survey compiler Markit warned in a teleconference that it might be a temporary boost from the recent soccer World Cup.
"We were very surprised, it's a good start to the second half of the year... but we still really suspect that an easing in GDP growth is on the cards for the second half of the year," said Chris Williamson at Markit.
Markit's Eurozone Flash Services Purchasing Managers' Index, made up of surveys of around 2,000 businesses ranging from hotels to banks, jumped to 56.0 in July from 55.5 in June, easily outpacing expectations for 55.0 and beating out even the most optimistic forecast polled by Reuters for 55.5.
The eurozone's manufacturing sector, which drove a large part of the economy's return to growth in the third quarter of last year, also saw the pace of growth accelerate.
The flash manufacturing index climbed to 56.5 in July from 55.6 in June, confounding forecasts for a fall to 55.2, while the output index leapt to 58.3 this month, from 57.2 in June.
The composite index, made up from the services and manufacturing sectors and often used to predict overall growth, rose to 56.7 this month from 56.0 in June, also confounding expectations for a decline to 55.5.
"We were consistent with 0.6-0.7 percent GDP growth in the second quarter and the output reading here is a just a touch above the average for the second quarter," Williamson said, adding: "For the eurozone as a whole it suggests a double dip will be avoided."
A Reuters poll earlier this month also said the chance of a dip back into recession had receded.
The eurozone economy escaped from its worst post-war recession in the third quarter of last year and data released earlier this month confirmed the economy grew 0.2 percent between January and March after a paltry 0.1 percent expansion in the final three months of 2009.
It is expected to have grown a healthier 0.6 percent in the second quarter but slow to growth of just 0.3 percent per quarter through to the middle of next year.
The economy is seen growing 1.3 percent next year, compared to 2011 forecasts for 2.0 percent in major trading partner Britain and 2.8 percent for the United States, the world's biggest economy.
The manufacturing sector's new orders index soared to 57.2 this month from 55.9 in June as market conditions improved and on higher sales to the U.S. and buoyant Asian economies.
Exports will have been boosted by a weak euro, which has been battered by fears over the debts of Greece and other euro area members. The single currency hit a four-year trough last month.
Data released last week showed the eurozone swung to a trade deficit in May as a rebound in global demand for eurozone goods meant exports surged year-on-year but by much less than imports. The jump in imports is likely to signal higher domestic demand, boding well for economic recovery.
Germany, the 16 nation-bloc's biggest economy, saw its services sector grow at its fastest pace in almost three years while its manufacturing sector saw growth pick up to a pace not far off April's 14-year survey high.
Neighboring France, the second biggest economy, saw a further upturn in its services sector but the pace of growth in its manufacturing sector slowed.
The eurozone service sector employment index rose to 51.7 this month, from 50.8 in June, its highest since April 2008 and its third month above the break-even point.
The composite output price index rose to 49.8 this month, up from June's 49.4, suggesting there was less need for businesses to cut prices to drum up business.
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