FX.co ★ Eurozone Manufacturing Sector Remains in Contraction

The HCOB Eurozone Manufacturing PMI increased to 49.5 in January 2026, closely aligning with the preliminary estimate of 49.4 and rising from December's nine-month low of 48.8. Although this marks an improvement, the PMI still indicates a third consecutive month of contraction, suggesting the downturn was relatively mild. New orders continued to decline for the third month running, whereas output saw a return to growth after experiencing its first decline in ten months during December. On a country-by-country basis, manufacturing conditions saw improvements in Greece, France, and the Netherlands, but faced further deterioration in Germany, Italy, Spain, and Austria. As the year began, cost-cutting prevailed, leading companies to reduce employment, purchasing activities, and inventories in January. Regarding inflation, input cost pressures surged to a three-year peak, while output prices remained broadly stable. Nonetheless, looking to the future, business confidence has increased, with expectations reaching their highest since February 2022.