Eurozone private sector grew at the fastest pace in five months in January, suggesting that lower oil prices and weaker euro supported the recovery in the region.
Germany experienced an upturn at the start of the year, while France fared particularly bad again. The strongest upturn was seen outside of France and Germany, where the surveyed countries collectively enjoyed the strongest rise in business activity since last July.
Going forward, private sector activity is set to pick-up given the improved sentiment and weaker exchange rate after the European Central Bank's historic stimulus announcement this week.
The Eurozone composite output index rose more-than-expected to a five-month high of 52.2 in January from 51.4 in December, flash survey data from Markit Economics showed Friday. Economists has forecast the measure to climb to 51.7.
A score above 50 suggests expansion in the private sector.
The flash services Purchasing Managers' Index rise to 52.3 in January from 51.6 a month ago. It was the highest reading in three months. Economists had forecast the index to move up to 52.
At the same time, the manufacturing PMI increased slightly to a six-month high of 51.0, in line with forecasts, from 50.6 in December.
The rate of expansion remains worryingly weak with the PMI running at a level consistent with GDP rising at a quarterly rate of just 0.2 percent, and the economy both fragile and susceptible to shocks and further setbacks, Chris Williamson, chief Economist at Markit, said.
The effects of the ECB's quantitative easing programme and the associated weakness of the exchange rate should mean that activity continues to pick up, Jennifer McKeown, a senior European economist at Capital Economics, said.
Nonetheless, the growth will be slow, doing the little to erode the spare capacity in the economy and holding open the risk of a prolonged bout of deflation, the economist said.
Data today showed that new orders increased at the sharpest rate for five months as demand picked up, representing a turn around from the marginal decline seen back in November.
At the same time, backlogs of work continued to fall in January, but the decline was only marginal and the smallest since last August.
Employment growth picked up slightly to show the largest monthly rise since last July, although the rate of job creation remained disappointingly weak overall.
The recent slump in oil prices was meanwhile a major factor behind the first drop in companies' input costs since May 2013. Firms' selling prices consequently fell at the fastest rate since February 2010.
The German private sector remained in expansion territory in January, signaling a further rise in the private sector output. The flash composite output index rose to 52.6 in January from 52 in December. This was the strongest growth in three months.
Output growth strengthened across both the services and manufacturing sectors. The services PMI rose to 52.7 from 52.1 in December. Meanwhile, the manufacturing PMI fell unexpectedly to 51 from 51.2 in December. It was forecast to rise to 51.7.
By contrast, the French private sector contracted further at the start of 2015 with services falling back into negative zone. The composite PMI fell to 49.5 in January from 49.7 in December.
French service providers registered a slight fall in activity, reversing a marginal increase in December. The PMI dropped to 49.5 from 50.6 in December. The score was forecast to rise to 50.8.
Meanwhile, manufacturers reported a marked easing in the rate of decline in output, with the latest drop the weakest in the current eight-month period of contraction. The manufacturing PMI rose notably to 49.5 from 47.5 a month ago. Economists had expected the index to rise to 48.
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