Eurozone business activity showed little momentum at the start of 2026, with January PMI data pointing to a fragile and uneven recovery. Manufacturing PMI improved modestly from 48.8 to 49.4, but remained in contraction. Services PMI eased from 52.4 to 51.9, leaving Composite PMI unchanged at 51.5, a level consistent with only modest growth.
According to Cyrus de la Rubia of Hamburg Commercial Bank, the recovery “still looks rather feeble.” Manufacturing continues to signal weakness, while services growth has moderated.
For the ECB, the details are “anything but reassuring”. Services inflation has risen sharply in terms of sales prices, while input cost inflation remains elevated. That dynamic is likely to reinforce the Governing Council’s preference to hold rates steady, with some hawkish members potentially arguing that the next move should be up rather than down.
Country-level divergences persist. Services activity in Germany expanded at a relatively solid pace in January, while French services slipped into contraction. In manufacturing, France marginally outperformed Germany, though output growth in both remains weak.
