Finance
Germany's manufacturing sector shows signs of recovery, PMI indicates
Published by Global Banking and Finance Review
Posted on February 2, 2026
2 min readLast updated: February 2, 2026
Quick Summary
Germany's manufacturing sector shows early recovery signs with a PMI rise in January, despite ongoing employment declines and rising input costs.
Germany's Manufacturing Sector Displays Early Signs of Recovery
Overview of Germany's Manufacturing Recovery
BERLIN, Feb 2 (Reuters) - Germany's manufacturing sector began 2026 on a positive note, with output returning to growth in January after a brief contraction in December, according to a survey on Monday.
PMI and New Orders
The headline HCOB final Purchasing Managers' Index (PMI) for German manufacturing, compiled by S&P Global, rose to 49.1 in January, from 47.0 in December, a slight increase on the preliminary reading for the first month of the year of 48.7.
Employment Trends
January's reading also marks a three-month high, though it remains below the 50.0 mark, indicating contraction. A reading above that points to growth.
Input Cost Challenges
The upturn was bolstered by a marginal rise in new orders, marking the first increase in three months, though employment levels in the sector continued to decline at a marked pace, reflecting ongoing reorganisations and unfilled vacancies.
"This smells a bit like a recovery could be underway," said Hamburg Commercial Bank chief economist Cyrus de la Rubia.
"Output has rebounded rather swiftly from the drop in December, optimism about future output has risen from an already high level, and new orders have ticked up a bit," he said.
With an eye to reduced employment, de la Rubia said firms that have streamlined their production processes may find themselves well positioned if demand does pick up this year.
Manufacturers remain optimistic about the year ahead, with expectations reaching a seven-month high. However, the situation remains fragile, said de la Rubia, as companies are still rapidly drawing down their inventory and backlogs are shrinking.
Input cost inflation also surged to a 37-month high, driven by rising prices for metals, energy and wages that companies have struggled to pass on to customers, said de la Rubia.
"At best, they've managed to slow the ongoing three month decline in output prices, nothing more," he added.
(Reporting by Miranda Murray; Editing by Toby Chopra)
Key Takeaways
- •Germany's manufacturing PMI rose to 49.1 in January.
- •New orders increased for the first time in three months.
- •Employment levels continue to decline despite recovery signs.
- •Input cost inflation surged to a 37-month high.
- •Manufacturers remain cautiously optimistic about 2026.
Frequently Asked Questions about Germany's manufacturing sector shows signs of recovery, PMI indicates
1What is inflation?
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power.
2What are new orders in manufacturing?
New orders refer to the total number of orders received by manufacturers for products, indicating future production levels.
3What is economic growth?
Economic growth is the increase in the production of goods and services in an economy over a period, typically measured by GDP.
