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Europe’s manufacturing and service industries unexpectedly returned to growth in August for the first time in over a year, suggesting the economy is gaining strength.

A composite index of both industries rose to 50.4 from 47 in July, higher than an initial estimate of 50 published on Aug. 21, Markit Economics said today. It also marks the gauge’s first reading above 50, indicating expansion, in 15 months. The index is based on a survey of purchasing managers.

The euro-area economy may emerge from its worst recession in over six decades this quarter after governments stepped up rescue measures and the European Central Bank injected billions of euros into markets. While the economy barely contracted in the second quarter, rising unemployment and the ending of stimulus measures mean the recovery may take time to gain traction. A separate report today showed that retail sales continued to fall in July.

The purchasing managers index “boosts expectations that the eurozone will return to growth in the third quarter after essentially stabilizing in the second,” said Howard Archer, chief euro-region economist at IHS Global Insight in London. Still, “there is a clear case for the ECB to retain an accommodative stance.”

The services index rose to 49.9 in August from 45.7 in the previous month, today’s report showed. That’s the highest level since May 2008. A gauge of manufacturing increased to 48.2 from 46.3 in July, the highest reading since June 2008.

Rising Confidence

The International Monetary Fund plans to raise its global growth forecast for 2010 to “just below” 3 percent from 2.5 percent, division chief Jorg Decressin said on Sept. 1. The Washington-based lender with 185 member nations will publish its revised forecasts on Oct. 1.

In Europe, consumer spending rose for the first time in more than a year in the second quarter and exports fell at a slower pace, helping to ease the recession. European confidence in the economic outlook rose for a fifth month in August and investors were the most optimistic in a year.

Pernod Ricard SA, the world’s second-largest liquor maker based in Paris, today reported a 13 percent gain in full-year profit, beating analysts’ estimates. Volkswagen AG, Europe’s largest carmaker, on Aug. 7 raised its full-year sales forecast.

The ECB today may keep its benchmark interest rate at a record low of 1 percent, according all 58 economists in a Bloomberg survey. The Frankfurt-based central bank has offered banks unlimited cash over 12 months and in July started buying covered bonds to bolster the economy and revive lending.

‘Not Optimistic’

Still, a recovery may remain too fragile to encourage companies to add workers. European unemployment rose to 9.5 percent in July, the highest since 1999. Retail sales declined 1.8 percent in July from a year earlier after falling 2 percent in the previous month, the European Union’s statistics office in Luxembourg said today.

Renault SA, France’s second-largest carmaker, on July 30 reported a first-half loss after cutting output. LVMH Moet Hennessy Louis Vuitton SA, the world’s biggest luxury company based in Paris, said the same month that it plans to “significantly” reduce investment in production this year to counter a slump.

“I cannot be optimistic for the next months because we know from our experience that the negative reaction of the labor market to the economic contraction has a certain time lag,” European Union Monetary Affairs Commissioner Joaquin Almunia said yesterday. “The figures are worrying.”

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