Euro-zone manufacturing contraction eases in Jan. (by William L. Watts)

FRANKFURT (MarketWatch) -- Manufacturing activity across the 17-nation euro zone continued to shrink in January, but contracted at a slower pace as Germany's manufacturing sector returned to growth, according to data released Wednesday. The Markit manufacturing purchasing managers index for the region rose to 48.8 from 46.9 in December, coming in a shade above an earlier estimate of 48.7. A reading of less than 50 indicates a contraction in activity, while a figure of more than 50 signals expansion. Germany's manufacturing PMI jumped to 51.0 from 48.4 in December, while readings for Italy, Spain and the Netherlands showed the pace of contraction had eased. "Euro-area manufacturing has started 2012 surprisingly well, suggesting the region may avoid a slide back into recession," said Markit chief economist Chris Williamson, who also cautioned that a lack of growth in new orders, even in Germany, may leave manufacturers reluctant to expand capacity or add staff.