With 50 the dividing line between expansion and contraction, the Purchasing Managers Index for the eurozone for July rose from 48.7 in June to 50.4, an 18-month high, Markit said.
The headline index includes the flash estimate of the Purchasing Managers Index for service-oriented businesses, which rose from 48.3 in June to 49.6 in July. It also includes the flash estimate of the PMI for manufacturing, which rose from 48.8 in June to 50.1 in July, a 24-month high.
Markit said the flash eurozone PMI for manufacturing production, the so-called output index, rose from 49.8 in June to 52.3 in July.
The figures are flash estimates that could be revised later. If they stand, it would be the fourth consecutive month the composite PMI had improved in the eurozone.
"The best PMI reading for one-and-a-half years provides encouraging evidence to suggest that the
euro area could -- at long last -- pull out of its recession in the third quarter," said Markit Chief Economist Chris Williamson in a statement.
"The revival is being led by a broad-based upturn in manufacturing, where growth surged to a two
-year high. Increased goods production was reported in Germany, France and across the rest of the region as a whole," he said.
"There are also promising signs of stabilization in the service sector, which hints at some much–needed upturns in domestic demand," he added.