Finance
Euro zone factory activity contracts in January but output rebounds, PMI shows
Published by Global Banking and Finance Review
Posted on February 2, 2026
2 min readLast updated: February 2, 2026
Quick Summary
Euro zone factory activity contracted in January, but output rebounded slightly. New orders continued to decline, while input costs rose sharply.
Euro Zone Manufacturing Activity Declines in January, Yet Output Rises
Euro Zone Manufacturing Activity Overview
BENGALURU, Feb 2 (Reuters) - Euro zone factory activity remained in contraction territory in January for the third straight month amid persistent weakness in new orders despite output returning to growth, a survey showed.
The HCOB Eurozone Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 49.5 in January from December's nine-month low of 48.8, slightly higher than a preliminary estimate of 49.4.
PMI readings above 50.0 indicate growth in activity, while those below that level point to a contraction.
PMI Index and Production Growth
"Some progress can be seen in the manufacturing sector, but it's happening at a snail's pace," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
New Orders and Job Cuts
The manufacturing output index, a key component of the headline figure, climbed back above the 50 threshold to 50.5 in January from 48.9 in December, indicating modest production growth.
However, new orders fell for the third consecutive month. The decline in new work was less severe than in December but still dragged down the headline index.
Factory job cuts continued for the 32nd straight month, although the pace of reduction was the slowest since September.
The country breakdown revealed significant divergence across the bloc. Greece registered the strongest performance with a five-month high of 54.2, while France recorded expansion at 51.2, its highest reading in over three and a half years.
By contrast, manufacturing sectors in Spain, Germany, Italy and Austria all remained in contraction, with Austria showing the weakest performance at 47.2.
"All in all, this highly uneven picture across the eurozone is not exactly laying the groundwork for a sustained upswing," added de la Rubia.
Input Costs and Manufacturer Confidence
Input costs rose at the fastest rate in three years, primarily due to higher energy prices.
Despite mounting cost pressures, manufacturers were unable to pass these on to customers, with output prices remaining virtually unchanged from December.
Still, manufacturers' confidence about the year ahead improved to its highest level since February 2022, suggesting optimism that conditions will eventually improve.
(Reporting by Indradip Ghosh; Editing by Toby Chopra)
Key Takeaways
- •Euro zone factory activity contracted for the third month.
- •Output rose slightly, with PMI at 49.5 in January.
- •New orders fell for the third consecutive month.
- •Greece showed the strongest performance in the bloc.
- •Input costs rose due to higher energy prices.
Frequently Asked Questions about Euro zone factory activity contracts in January but output rebounds, PMI shows
1What is PMI?
The Purchasing Managers' Index (PMI) is an economic indicator that reflects the prevailing direction of economic trends in manufacturing and services. A PMI above 50 indicates growth, while below 50 indicates contraction.
2What are new orders in manufacturing?
New orders refer to the total number of orders received by manufacturers for products that have not yet been fulfilled. It is a key indicator of future production activity.
3What are input costs?
Input costs are the expenses incurred by businesses for the raw materials and components needed to produce goods. Rising input costs can impact profitability and pricing strategies.
4What is job cut in the manufacturing sector?
Job cuts in the manufacturing sector refer to the reduction of workforce numbers due to various factors such as decreased demand, automation, or economic downturns.
5What is economic growth?
Economic growth refers to an increase in the production of goods and services in an economy over a period of time, typically measured by the rise in Gross Domestic Product (GDP).
