This article is more than 6 years old

This article is more than 6 years old

Greece's factory sector has finally returned to growth for the first time in more than four years, fuelling hopes that the country's long slump could be easing.

A survey released on Monday showed that Greek manufacturers finally reported their first expansion since August 2009 in January, helping Europe's manufacturing sector enjoy its strongest expansion in almost three years.

Markit, the data provider, reported that Greek factories recorded an increase in new orders and higher exports last month, although manufacturers continued to trim their workforces. Economists said the long-awaited recovery in Greek manufacturing boosted hopes the overall economy will finally stop shrinking this year – amid reports that the eurozone is close to agreeing a third bailout loan for Greece, worth up to €20bn (£16bn).

The area's largest economy, Germany, led the new year's manufacturing march but Italy, Spain, the Netherlands, Austria, Ireland and Greece also expanded. France, however, continued to lag behind the rest of the eurozone.

The headline reading for the region as a whole rose to 54.0 in January from 52.7 in December on the Markit Eurozone Manufacturing PMI. That was well above the 50-mark separating growth from contraction and slightly ahead of a preliminary estimate of 53.9 released last month.

Chris Williamson, chief economist at survey compilers Markit, said the eurozone manufacturing recovery gained "significant further momentum" in January. All the figures were higher than the 'flash' readings published two weeks ago.

"The survey data indicate that manufacturing output across the eurozone is growing at a quarterly rate in excess of 1%, led by Germany, where the rate of increase is perhaps as strong as 3%," he said.

"However, perhaps the most important development in the report is the further revival of manufacturing in the region's periphery. Both Italy and Spain are seeing robust growth of output and order books, and the Greek PMI's rise above 50 for the first time since August 2009 is an important signal of how even the most troubled member states are returning to growth."

Greek factory activity rises, but jobs still being cut

Markit's reading on Greek factory activity rose to 51.2 in January, up from 49.6 in December. But with job losses still up across the sector, any recovery has not yet reached the country's battered population.

The survey also showed that firms kept cutting prices, which will push Greece deeper into deflationary territory.

In Germany, factory output grew at the fastest rate in 32 months with the PMI surging to 56.5 in January from 54.3 in December. That was the strongest reading asince May 2011.

New orders rose, as did the amount of work stacking up, which encouraged firms to hire more staff – proving once again that Europe's largest economy is outperforming the rest of the eurozone.

But France remained a laggard, with its factory output falling again, although at a slower pace.

The French manufacturing PMI rose to 49.3 in January, from 47.0 in December.

Markit's Williamson said France was "showing signs of stabilising" as it enjoyed a welcome return to export growth. But he added: "Manufacturing in the eurozone's second-largest member state remains in overall decline and a drag on the region."

Howard Archer, economist at IHS Global Insight highlighted the manufacturing recovery in all the eurozone's peripheral countries.

Greece's long-awaited return to factory growth, and the pick-up in Spain and Italy, suggested the euro area's economy continued to recover, Archer said.

"This fuels hopes that sustainable Spanish and Italian recovery really is now gradually developing. Furthermore, Greek manufacturing activity ... expanded in January for the first time since August 2009, suggesting that there is a real chance that Greek GDP could finally stop contracting overall in 2014."