Hopes for eurozone growth upgrade as recovery firms

Chris Williamson, chief economist at Markit, said current consensus of 1pc growth for 2014 was "already looking somewhat conservative", adding that he expected GDP forecasts for 2014 to start being revised up if the PMI continues to rise. He said that the spread of the recovery beyond Germany to the rest of the bloc "adds to the likelihood it can be sustained".

Howard Archer, chief eurozone economist at IHS Global Insight, said; "Looking ahead, a combination of factors will hopefully allow eurozone economic growth to gradually improve as 2014 progresses and there is a mounting possibility that GDP growth could exceed 1pc, which is our current forecast."

They warned however that the dominance of the manufacturing sector in driving growth showed that consumer sentiment remains weak.

“The main concern is that the recovery is still all-too dependent on the manufacturing sector," said Mr Williamson.

"Although the service sector has returned to growth, its weak pace of expansion reflects still-subdued domestic demand – especially from consumers – in many eurozone countries, notably France and Italy. A revival in consumer sentiment in these countries will be an important ingredient of a more robust upturn."

These signs of firmer growth will ease pressure on the European Central Bank to cut interest rates. Some economists had been calling for a further rate cut from the current record low of 0.25pc to combat the threat of deflation in the single currency bloc.

Mr Archer said the Bank was likely to leave interest rates unchanged on Thursday, when its governing council announces the outcome of its January policy meeting. He added that there was more chance of a policy change following the council's March meeting, when they will have new inflation and growth forecasts.

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