LONDON: The euro zone's battered economy is probably recovering but the gulf between its two biggest members is widening, according to a survey on Tuesday that showed business optimism in the bloc at an eight-month high.
Markit's Eurozone Composite PMI, based on business activity across thousands of companies, and a good gauge of economic growth, rose in January to a 10-month high of 48.6 from 47.2 in December - an improvement on the preliminary reading of 48.2.
While still below the 50 mark that divides growth and contraction, where it has been since February last year, it has risen for the third straight month.
Private industry makes up nearly two-thirds of the euro zone's economy.
But the data showed a continued divergence between the euro zone's powerhouse economy Germany and that of neighbouring France that will worry policymakers.
The German PMI chalked up its biggest one-month rise since August 2009, soaring to its highest since June 2011, while the reading for the bloc's second-biggest economy France plummeted to its lowest in nearly four years. The French services PMI was even below readings from perennial laggards Spain and Italy.
"That's a really worrying sign. It's going to cause more tensions between Germany and France on various aspects of euro zone management," said Jennifer McKeown, economist at consultancy Capital Economics.
"France will continue to call for more supportive policy, not just for the periphery but the euro zone as a whole. Germany is taking a much more hardline stance."
The euro zone PMI for services firms rose to a 10-month high of 48.6 from 47.8, above a flash estimate of 48.3.
Across the channel in Britain, activity amongst the country's services firms, which account for more than three-quarters of gross domestic product, rose.
"The UK services PMI has bounced back into growth territory, dampening fears over an unprecedented triple-dip recession being called," said James Knightley at ING.
After only one quarter of expansion, Britain's economy contracted again at the end of last year. That put it on the brink of its third recession in four years.
Growth in the United States services business is expected have fallen slightly last month following relative weakness in the private services component of January's payrolls report. The data are due at 1500 GMT.
