Eurozone manufacturing moved back into expansion in February. The HCOB Eurozone Manufacturing PMI rose to 50.8 from 49.5 in January, a 44-month high and the first reading above 50.0 since August.
The improvement was increasingly demand-led, with new orders rising for only the second time in almost four years. Output strengthened in parallel, while job cuts continued but the sector relied less on backlog run-down, suggesting that production is starting to be supported by fresher work rather than clearance alone.
The upturn was also broader across countries, with six of the eight monitored eurozone economies above 50.0. Germany returned to growth, France remained only marginally above the line, while Italy and the Netherlands also expanded. Spain was flat and Austria stayed slightly in contraction.
For supply chains and freight markets, the combination of firmer output and improving orders points to stronger industrial activity, particularly if Germany’s rebound holds. However, the survey also points to worsening inflation dynamics, as input cost inflation rose to its highest level in more than three years and factory gate prices increased at the fastest pace since early 2023, linked to higher energy and metal costs and carbon-related changes at the start of the year.
Despite ongoing job cuts, confidence strengthened sharply, reflecting expectations of better conditions later in 2026 rather than a fully normalised order environment.
Germany: manufacturing returns to growth as orders rise and exports stabilise, but cost pressures intensify
Germany’s manufacturing sector returned to expansion in February for the first time since mid-2022, signalling a clear improvement in operating conditions in Europe’s largest industrial economy.
The shift was driven by a stronger flow of new business, supported by domestic demand and early signs of improvement abroad. Export demand stabilised, and output rose for a second month, pointing to a firmer industrial base for supply chains linked to German production.
Labour market adjustment continued, but job cuts eased as workload pressures began to re-emerge, with backlogs increasing slightly for the first time since spring 2022 — an early signal that the recovery is becoming less dependent on clearing old orders.
Purchasing activity moved closer to stabilisation and inventory reduction slowed, but supply constraints remained visible. Delivery delays intensified again, with some firms citing shortages of electronic components — a factor that can translate into uneven production schedules and stop-start freight demand.
Cost dynamics were the main warning signal. Price pressures strengthened across multiple inputs, and firms began raising selling prices again, suggesting that margin pressure is no longer being absorbed entirely internally. Business expectations improved further, supported by optimism about market conditions and product development, even as cost risks built.
United Kingdom: export-led improvement continues as output growth hits a 17-month high
The UK manufacturing upturn extended into February, with the sector remaining in expansion for a fourth consecutive month.
Output rose again and growth accelerated, but the key feature was a clear export-led improvement, with overseas orders rising at their fastest pace in more than four years. Reports of stronger demand from multiple regions point to more supportive conditions for cross-border freight tied to UK manufacturing.
The recovery remained uneven. Consumer goods continued to lead, while investment goods lagged, and smaller firms reported weaker performance than medium and large manufacturers — highlighting that the improvement is not yet broadly shared across the sector.
Despite better demand, manufacturers remained cautious on staffing, with employment falling again, though only slightly.
Inflation signals strengthened. Input costs rose more quickly again and supplier delays persisted, while selling prices increased for a third month, though at a slower pace. Business sentiment stayed close to January’s high, but firms still flagged policy uncertainty and geopolitical risks, including concerns about possible US tariff developments.
France: output rises again, but demand remains weak and finished goods stocks build
France’s manufacturing sector stayed only marginally in expansion in February, edging closer to stagnation after January’s stronger result.
Production rose again, but the underlying pattern remained fragile: output continued to run ahead of sales, with new orders falling once more. This mismatch contributed to a rise in finished goods inventories, signalling that the recent output strength is not yet anchored in a sustained demand recovery.
External markets remained a drag. Export weakness intensified, with foreign orders falling at the sharpest pace in seven months, pointing to continued softness in cross-border industrial flows linked to French manufacturing.
Firms remained cautious on inputs and staffing. Purchasing fell, employment declined again, and delivery times still lengthened — though less severely than in previous months.
Price pressures moved higher. Rising input costs increasingly fed into selling prices, indicating improved pass-through compared with late 2025. However, the survey commentary warned that a durable recovery is unlikely while new orders remain in decline, even if output continues to hold up in the short term.
Spain: manufacturing stabilises, but order books keep shrinking and costs stay elevated
Spain’s manufacturing sector returned to stagnation in February after two months of mild contraction, but demand conditions remained weak beneath the headline stabilisation.
Output was broadly steady, yet order books kept shrinking, with firms citing competitive pressures and delayed decision-making. Export demand also remained in decline, and respondents pointed to the combined impact of tariff uncertainty and exchange-rate effects on foreign sales.
With demand still subdued, firms continued to rely on backlog completion, while keeping a tight grip on costs and capacity. Employment, purchasing and inventories were cut again, though less aggressively than in January.
Cost pressures remained a central issue. Input inflation accelerated further, driven largely by higher metal costs, and some companies also cited higher transport fees feeding into overall cost increases — a direct signal that logistics-related charges are affecting manufacturers’ cost bases. Despite competitive conditions, selling prices moved slightly higher again, suggesting limited but improving pricing power.
Poland: demand weakens again as job cuts accelerate and input prices surge
Poland’s manufacturing downturn deepened in February, reversing some of the stabilisation that had been emerging earlier in the winter.
The deterioration was driven by a sharper drop in demand, with new orders falling faster again and exports also weakening. Output continued to decline, but only modestly — suggesting firms cut activity cautiously at first.
The bigger adjustment came through labour and procurement. Job cuts accelerated sharply, while purchasing fell faster and inventories were run down again, reinforcing a defensive stance across the supply chain.
At the same time, cost pressures surged to their strongest level in more than three years, particularly for metals and wood products. Yet weak demand constrained pass-through, and selling prices edged lower again, pointing to continued margin pressure.
Despite the poor February reading, sentiment remained above the post-pandemic average, indicating that manufacturers are still positioning for recovery later in the year — even as near-term conditions worsen.
Italy: sector returns to growth as domestic orders rise, but exports weaken further and inflation pressures intensify
Italy’s manufacturing sector returned to expansion in February after two months of contraction, driven mainly by improved domestic activity.
The rebound was supported by fresh growth in output and total new orders, but the recovery remained uneven: export demand weakened further, highlighting ongoing vulnerability to international uncertainty.
Labour market signals were mixed. Employment edged up slightly, but backlogs continued to fall, indicating that spare capacity has not been fully absorbed and that the upturn is not yet generating sustained workload pressure.
Purchasing remained cautious, while delivery times improved for a second month, reflecting calmer supply conditions.
The major shift came on prices. Input cost inflation strengthened sharply and firms passed through more of the increase, pushing selling prices higher at the fastest pace in ten months. Confidence rose to its strongest level in more than five years, but the survey commentary underlined that the recovery remains fragile while exports stay under pressure.
Netherlands: output growth strengthens, but export orders fall again and firms cut buying amid a sharp cost jump
The Dutch manufacturing sector stayed in modest expansion in February, but the picture remained mixed beneath the headline improvement.
Output growth strengthened, yet demand failed to follow through, with new orders falling again and export sales declining at the fastest pace in almost a year. This points to continuing fragility in external markets and subdued investment demand.
Despite softer orders, employment rose again, while backlogs fell and inventories were reduced further. At the same time, manufacturers cut purchasing more aggressively, signalling a cautious approach to upstream demand and freight-linked replenishment.
Cost pressures intensified sharply. Input inflation rose to its highest level in nearly a year and price pass-through strengthened, with selling prices rising at the fastest pace in almost a year. Confidence recovered after January’s dip, but commentary also highlighted that energy-intensive industries and automotive remain under pressure, even as broader European manufacturing conditions improve.
