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Private sector industry in the eurozone returned to growth in July, according to a closely-watched survey, boosting hopes that the single currency area will soon emerge from recession.

The Markit eurozone Purchasing Managers' Index (PMI), which measures business output, was 50.4 in July. A figure above 50 indicates expansion.

July's figure was up from 48.7 in June, and marks an 18-month high.

The eurozone has been in recession since the end of 2011.

"The best PMI reading for one-and-a-half years provides encouraging evidence to suggest that the euro area could - at long last - pull out of its recession in the third quarter," said Chris Williamson, chief economist at Markit.

He said the revival in the economy was being led by a broad-based upturn in manufacturing, and signs of stabilisation in the services sector.

But he warned that employment was continuing to fall, although at a slower rate than earlier in the year.

Markit's survey found that manufacturers reported the largest monthly increase in output since June 2011, and output in the sector grew for the first time since February 2012.

Service sector activity fell, but the decline was the smallest in 18 months, and Markit said the data showed signs of stabilising after "marked rates of decline" earlier in the year.

The PMI measure is based on surveys of thousands of companies across the eurozone and is regarded as a reliable indicator of economic growth.

Mr Williamson said the latest data tentatively suggested the eurozone would grow by 0.1% in the third quarter of this year.

The latest forecasts from the European Central Bank are for the eurozone economy to contract by 0.6% over 2013 as a whole, but for it to recover with growth of 1.1% in 2014.

The data revealed a continuing gap between eurozone members.

Germany continued to perform well, with steep growth in manufacturing and services, and strong job creation.

However, southern European states saw output falling, but only marginally.