Business sentiment hit a 20-month high in the eurozone in January 2026, with firms increasingly optimistic about an increase in output over the coming year, according to the latest HCOB Flash Eurozone PMI data compiled by S&P Global.
Sentiment in the manufacturing sector stood at its highest level for close to four years, the data showed.
On a country-by-country basis, confidence improved in the EU’s two largest economies, Germany and France, however the rest of the euro area reported a slight easing.
Composite PMI Index
The HCOB Flash Eurozone Composite PMI Output Index stood at 51.5 in January, unchanged from the previous month.
Business activity expanded in the month, the report noted, on the back of an increase in new orders, however at the same time, firms reduced their staffing levels for the first time in four months.
There were variations in growth pattens by sector, with manufacturing output returning to growth following a fall in output – the first in ten months – at the end of 2025. The services sector, meanwhile, continued to show growth, albeit at its slowest rate in four months.
The overall pace of expansion was impacted by a reduction in business activity in France, the report found, with output ticking downward for the first time in three months.
The overall reduction in staffing levels, meanwhile was driven by Germany, where job cuts were at their most pronounced level since 2009, notwithstanding the pandemic period. In most other European countries, employment levels rose.
A ‘feeble’ recovery
“The recovery still looks rather feeble,” commented Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. “In manufacturing, the headline PMI continues to signal weakness, while growth in services activity is somewhat more moderate than the month before. Overall economic growth remains unchanged.
“Looking ahead, the low growth in new orders is certainly no game changer. Instead, the start into the new year points to more of the same in the months to come.
“For the ECB, these results are anything but reassuring. Inflation in the services sector, which the central bank is watching particularly closely, has increased significantly in terms of sales prices. Input cost inflation remains an issue as well, though it has accelerated less than sales price inflation. As a result, ECB members are likely to feel validated in holding rates where they are. Some of the more hawkish members may even argue that the next move should be up rather than down.” Read more here.
