LONDON, Jan 24 Reuters Euro zone business activity made a surprise return to modest growth in January, adding to signs the downturn in the bloc may not be as deep as feared and that the currency union may escape recession, a survey showed.

SP Global39;s flash Composite Purchasing Managers39; Index PMI, seen as a good gauge of overall economic health, climbed to 50.2 this month from 49.3 in December.

January was the first time the index has been above the 50 mark, which separates growth from contraction, since June and the reading was ahead of the median Reuters poll forecast of 49.8.

The rise in the purchasing managers39; indices is likely to fuel hopes among many that the economy in the euro area might just escape a recession after all, said Christoph Weil at Commerzbank.

However, Weil added that a clear deterioration in the economic environment continued to point to at least a mild recession.

A moderate winter so far, falling gas prices and recent positive economic data meant some quarterly growth forecasts in a Reuters poll published on Monday were upgraded although a technical recession was still predicted.

Pressure on Germany39;s economy, Europe39;s largest, eased further in January as inflation slowed and businesses looked to the new year with optimism, a sister survey showed, although sentiment was still shy of predicting a return to growth.

In France, the bloc39;s second biggest economy, output fell slightly overall again in January, its PMI showed, but…