The Purchasing Managers' Index for Manufacturing Industries in the eurozone had surged from 50.3 points in July to 51.4 points in August, British research group Markit said Monday.

In what had been the fastest monthly increase in two years, the closely-watched economic indicator jumped across the 50-point mark for the first time since February 2012, Markit noted.

The 50-point line in the PMI was important as it demarcated economic expansion from contraction.

"Although gains are still only modest, companies reported the strongest improvement in business conditions for just over two years," Markit Chief Economist Chris Williamson said.

He noted a strong rise in new orders for most of the companies in the eurozone, adding that this suggested the upturn would continue in September.

Williamson also said there were encouraging signs for the recovery to take hold across the entire eurozone as factories' output had picked up in almost all of its member countries, except in France and Greece. Industries were seeing steeply rising demand most notably in Germany, the Netherlands, Austria, Spain and Italy, he added.

However, the upswing was not yet feeding through to the labor market in the 18-nation currency area, as companies had reduced their staff for the 19th month running in August.

uhe/kms (Reuters, AFP)