Eurozone factory stabilises in January but stays in contraction

Manufacturing activity in the eurozone showed tentative signs of stabilisation in January, but overall conditions remained in contraction territory, S&P Global data on Monday showed.

The HCOB eurozone manufacturing purchasing managers' index rose to 49.5 points in January from 48.8 in December, but still below the 50.0-point threshold that separates growth from contraction.

The figure comes slightly above the 49.4-point flash reading published on January 23.

The output index climbed to 50.5 points from 48.9, marking a three-month high and also ahead of the 50.2-point flash estimation.

Manufacturing output rose in January, extending a pattern of mostly positive production readings over the past year. However, growth remained subdued as demand conditions stayed weak.

New orders declined for a third consecutive month, though the pace of contraction eased, while new export orders also continued to fall in line with trends seen since mid-2025.

Labour market conditions remained soft, with manufacturers cutting jobs for a 32nd straight month. Firms also continued to scale back purchasing activity and inventories.

Cost pressures intensified at the start of 2026, with input price inflation accelerating to a three-year high, driven in part by higher energy and industrial metal prices.

Output prices, however, were broadly unchanged on the month.

Business sentiment improved, with manufacturers' expectations for output over the next 12 months rising to their strongest level since February 2022.

At a country level, manufacturing conditions improved in Greece, France and the Netherlands, with France recording a 43-month high PMI reading. These gains were offset by further deterioration in Germany, Italy, Spain and Austria.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said: "Some progress can be seen in the manufacturing sector, but it's happening at a snail's pace...his highly uneven picture across the eurozone is not exactly laying the groundwork for a sustained upswing."

The eurozone manufacturing PMI is compiled by S&P Global from responses to questionnaires sent to around 3,000 private sector companies in the currency bloc, collected between January 12 and 23.

Final eurozone services and composite data will be released on Wednesday.