Eurozone manufacturing expanded at its fastest rate in almost four years in February, driven by a rebound in new orders and higher factory output, although rising costs continued to pressure profit margins, according to a survey released on Monday.
The HCOB Eurozone Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 50.8 in February from 49.5 in January, marking its highest level since June 2020 and the first time the index crossed the 50 mark—signifying growth—since August.
“This seems to be a broad-based recovery of the eurozone manufacturing sector, with six out of eight surveyed countries now in growth territory,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
The rebound was supported by the strongest increase in new orders since April 2022, with demand turning positive for only the second time in nearly four years. Factory output also expanded for the 11th time in 12 months, reaching a six-month high.
Germany led the recovery, returning to growth for the first time in three-and-a-half years. Italy, the Netherlands, Ireland, and Greece also recorded solid expansions, while France saw a slowdown in manufacturing after a strong performance in January. Spain remained stagnant, and Austria experienced a marginal decline.
Export orders stayed weak but contracted at the slowest pace in three months, signaling that external demand might be stabilising.
Despite the growth, inflationary pressures intensified. Input costs increased at the fastest rate in more than three years, driven by rising energy prices. As a result, manufacturers raised their selling prices at the steepest pace since March 2023.
Business confidence, however, improved sharply, reaching a four-year high as companies expressed optimism about growth prospects over the next year.
Employment in the sector continued to decline, extending a trend that began in June 2023, though the pace of job losses eased slightly compared with previous months.
Analysts say the data points to a cautious recovery, with manufacturers navigating the dual challenges of increasing demand and higher operational costs. The overall picture suggests that while eurozone factories are regaining momentum, inflation and energy price volatility remain key concerns for sustaining growth.
The survey highlights the resilience of the manufacturing sector across Europe and signals that industrial activity could help support broader economic expansion in the first quarter of 2026.
