The euro zone's manufacturing workforce grew in December for the first time in more than four years, according to a new survey.
The RBS/NTC Eurozone Purchasing Managers' Index (PMI) showed the sector expanding overall at its fastest pace since August 2004, while production and new orders both hit 17-month highs.
Companies struggled to keep pace with demand for their goods.
The overall PMI rose to 53.6 from 52.8 in November, above the consensus forecast of 53.3.
Euro zone companies responded to growing backlogs of work and falling stocks of finished goods by creating more jobs than they shed for the first month since May 2001.
Although the PMI employment index at 50.3 showed only marginal growth, Chris Williamson, chief economist at NTC Research, described the results as "very encouraging".
Euro zone companies have been cutting jobs under pressure from global competition and high raw material prices, and high unemployment has in turn held back consumer spending.
But Mr Williamson said there was now significant evidence of manufacturers struggling to keep pace with demand.
The PMI survey showed the pace of input price rises easing slightly in December, to an index level of 62.2 from 62.6, while the output price index was unchanged at 51.4.
Stocks of finished goods showed their steepest fall over the fourth quarter of 2005 since the survey began in 1997, although the index edged up to 46.8 in December from 46.7 in November.
"This points to further expansion of output and capacity in coming months," Mr Williamson said.