Euro zone manufacturing activity stayed in contraction territory in January, marking the third straight month below the 50 growth threshold even as output recovered, a survey compiled by S&P Global showed. The HCOB Eurozone Manufacturing Purchasing Managers' Index rose to 49.5 in January from 48.8 in December, narrowly exceeding a preliminary reading of 49.4. Readings above 50.0 denote expansion, while readings below that level indicate a contraction in activity.
"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, commenting on the modest improvement in the headline measure.
The manufacturing output index, a principal component of the PMI, climbed back above the 50 mark to 50.5 in January from 48.9 in December, signalling modest growth in production. Despite this uptick, new orders declined for the third consecutive month. The fall in new work was softer than in December but nonetheless weighed on the overall PMI reading.
Employment trends in the sector remained subdued, with factory job cuts continuing for the 32nd consecutive month. However, the pace of workforce reduction eased to its slowest rate since September, suggesting a gradual moderation in labour retrenchment.
The PMI survey revealed pronounced divergence across member states. Greece led the bloc with the strongest reading, reaching a five-month high of 54.2. France returned to expansion territory with a reading of 51.2, its highest level in more than three and a half years. In contrast, Spain, Germany, Italy and Austria all stayed in contraction, with Austria recording the weakest performance in the group 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, highlighting the regional disparities behind the aggregate figures.
Input costs climbed at the fastest pace in three years, a development the survey attributed mainly to higher energy prices. Despite mounting cost pressures, manufacturers were largely unable to pass rising expenses onto clients, with output prices remaining virtually unchanged compared with December.
Sentiment within the sector showed improvement: manufacturers' confidence in activity over the coming year rose to its strongest level since February 2022, indicating greater optimism that conditions may eventually improve even as current demand remains weak.
Taken together, the PMI data portray a manufacturing sector where production is beginning to recover but where persistent weakness in new business, uneven national performances and rising input costs continue to constrain a broader and more durable recovery.