By Jonathan Cable
LONDON (Reuters) - Euro zone private industry unexpectedly bounced back to growth this month as factories increased output for the first time in well over a year, business surveys suggested on Wednesday.
The surveys will delight European policymakers who have come under pressure to take action to support an economy struggling to escape from the longest recession in the bloc's history.
Markit's flash Eurozone Composite PMI, based on surveys of thousands of companies across the region and a reliable indicator of growth, jumped to an 18-month high of 50.4 in July from 48.7 in June.
That smashed even the most optimistic forecast in a Reuters poll and is the first month the PMI has been above the 50 mark that divides growth and contraction since January 2012.
"It's a very encouraging picture, it's pretty broad-based. Germany is leading the pack followed by France but even the periphery ... is seeing a return to growth in manufacturing," said Chris Williamson, chief economist at data collator Markit.
Williamson said the latest PMI results tentatively pointed to 0.1 percent gross domestic product growth in the 17-nation bloc in the current quarter, in line with a Reuters poll taken earlier this month.
The economy is expected to have stagnated last quarter, only just scraping out of the recession it has been mired in since late 2011.
MANUFACTURERS MAKE MORE
The flash manufacturing PMI rose above the break-even mark for the first time in two years, coming in at 50.1. That was above June's 48.8 and comfortably beat all the forecasts in a Reuters poll of 36 economists.
New factory orders increased for the first time since May 2011. The output index jumped to 52.3 from 49.8, its highest since June 2011, but that was partly a result of running down backlogs of work.
A PMI covering services firms, which make up the bulk of the bloc's economy, jumped to 49.6 this month from 48.3. That was well ahead of the median forecast of 48.7 in a Reuters poll and the highest reading since January 2012.
In a sign firms were increasingly optimistic about the future, the business expectations index rose to 56.9, a three-month high.
An earlier flash composite reading from Germany rose to a five-month high of 52.8 but in France the index held stubbornly below the 50-mark for the 17th month at 48.8, although still an improvement on June's 47.4.
Despite the improved readings firms across the private sector cut jobs again, although they did so at the slowest pace in 16 months.
"The employment number often takes a while to turn around. It is moving in the right direction, there is some light at the end of the tunnel and by the end of the year we might see the jobless rate coming down," Williamson said. Detailed PMI data are only available under license from Markit and customers need to apply to Markit for a license.
To subscribe to the full data, click on the link below: http://www/markit.com/information/register/reuters-pmi-subscriptions For further information, please phone Markit on +44 20 7260 2454 or email email@example.com
(Editing by Catherine Evans)