A rising number of manufacturers in the euro zone won new business in July and there are signs the sector could return to growth as early as September, according to a survey published today.
The Reuters Eurozone Purchasing Managers' Index of about 3,000 companies rose to show the sector was shrinking at a more modest pace in the month - notably in Germany, the region's dominant economy, where new business bounced back into growth.
Germany's sluggish economy has been a major drag on the region and better demand there helped boost the euro zone index to 48 in July from 46.6 in June - still below the 50 line where growth begins - but above market expectations of 47.
The US manufacturing index, compiled by the Institute for Supply Management, is due to be released at 2 p.m. and is forecast to bounce back above the 50 level after reaching 49.8 in June.
The euro zone survey could help to erode expectations that the European Central Bank will cut official interest rates again from their current 2 per cent to prop up the economy.
Rate cut expectations have been driven largely by fears that German business will not be able to grow if a US-led recovery proves weak and the euro currency remains strong against the dollar, making exports less competitive.
But the manufacturing survey, which reflects hard data on changes in activity levels, suggests domestic demand in Germany is finally picking up to supplement export orders.
Some German firms reported they had not been able to raise output levels fast enough to respond to the growth of business in July.