Finance
Euro zone economic momentum wanes further in January, PMI shows
Published by Global Banking and Finance Review
Posted on February 4, 2026
3 min readLast updated: February 4, 2026
Quick Summary
Euro zone growth slowed in January, with PMI at 51.3. Services sector weakened, while inflation pressures rose, affecting ECB decisions.
Euro Zone Economic Growth Slows Further in January, PMI Data Reveals
Euro Zone Economic Overview
BENGALURU, Feb 4 (Reuters) - The euro zone economy's growth slowed for a second consecutive month in January as demand nearly stagnated and hiring came to a halt, indicating a fragile start to 2026, a survey showed.
The HCOB Eurozone Composite Purchasing Managers' Index, compiled by S&P Global, fell to 51.3 in January from 51.5 in December, touching a four-month low. The figure was also lower than a preliminary estimate of 51.5.
PMI readings above 50.0 indicate growth in activity, while those below that level point to a contraction.
PMI Trends and Analysis
"The growth trajectory can be described as decent, but the situation is still not comfortable. Companies hardly hired any new staff in January," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
"The fact that new business barely grew also shows that the recovery in this sector is still fragile," he added.
Sector Performance
The moderation in overall growth stemmed from the services sector, where activity expanded at its weakest pace since September, offsetting a fresh expansion in manufacturing output.
The services business activity index eased to 51.6 from December's 52.4.
New business inflows across the currency bloc barely increased compared with December, signaling waning support from domestic markets despite a softer reduction in export demand.
Inflation and Employment
Employment virtually stagnated as factory job cuts cancelled out mild hiring in services.
Among the bloc's largest economies, Spain led growth despite recording its slowest expansion in seven months. Germany and Italy saw modest improvements, while France slipped into contraction territory for the first time since October.
Outlook for the ECB
Despite the slowdown, business optimism strengthened to its highest level since May 2024.
Price pressures built up across the euro zone, with input cost inflation accelerating for a third straight month to an 11-month high. In response, firms raised their prices at the strongest pace in nearly a year.
“The European Central Bank is not currently particularly concerned about inflation...(but) ECB members will be a bit concerned by the significant rise in cost inflation in the services sector and the visible increase in sales prices inflation that was signalled by the PMI," added de la Rubia.
The central bank is widely expected to hold its deposit rate on February 5 and through this year, a separate Reuters survey showed.
(Reporting by Indradip Ghosh; Editing by Joe Bavier)
Key Takeaways
- •Euro zone economic growth slowed for a second month in January.
- •The PMI fell to 51.3, a four-month low, indicating fragile growth.
- •Services sector growth was weakest since September, offsetting manufacturing gains.
- •Price pressures increased, with input cost inflation at an 11-month high.
- •ECB expected to hold deposit rate despite rising cost inflation.
Frequently Asked Questions about Euro zone economic momentum wanes further in January, PMI shows
1What is PMI?
The Purchasing Managers' Index (PMI) is an economic indicator that measures the activity level of purchasing managers in the manufacturing and service sectors. A PMI above 50 indicates expansion, while below 50 indicates contraction.
2What is inflation?
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI) or Producer Price Index (PPI).
3What is economic growth?
Economic growth refers to an increase in the production of goods and services in an economy over a period, usually measured as the percentage increase in real Gross Domestic Product (GDP).
4What is monetary policy?
Monetary policy is the process by which a central bank manages the supply of money, interest rates, and inflation to achieve macroeconomic objectives such as controlling inflation, consumption, growth, and liquidity.
5What is the European Central Bank?
The European Central Bank (ECB) is the central bank for the euro and is responsible for monetary policy in the Eurozone, aiming to maintain price stability and oversee the banking system.
