January PMI data point to a tentative stabilisation in parts of Europe’s manufacturing sector, but with momentum remaining highly uneven across countries. While some economies recorded easing contractions or a return to growth, others saw demand weaken further, particularly in export-oriented manufacturing. Cost pressures also intensified at the start of the year, complicating the outlook for producers and transport operators alike.
At the eurozone level, manufacturing output returned to modest growth in January, but this improvement was not supported by a broad-based recovery in new orders. Demand conditions remained fragile, employment continued to decline in the industry, and inventory reduction was still widespread. Against this backdrop, business confidence improved in several countries, reflecting expectations of better conditions later in 2026 rather than strength in current order books.
Outside the eurozone, the UK stood out with a clearer manufacturing rebound, supported by rising export demand. Within the bloc, France recorded the strongest output growth, while Germany and Italy showed signs of easing contraction. Spain moved further into downturn, Poland showed early positioning for recovery despite ongoing weakness, and the Netherlands hovered close to stagnation.
United Kingdom: manufacturing recovery gains traction as exports rebound
The UK manufacturing sector made a strong start to 2026, with growth accelerating and export demand returning to expansion. The Manufacturing PMI rose to 51.8 in January, a 17-month high, confirming a third consecutive month of expansion.
Output increased for the fourth month running, supported by improved export sales, customer restocking and a stabilising domestic market. New orders rose at their fastest pace in almost four years, while export orders increased for the first time in four years, driven by demand from Europe, the US and Asia. This marks a notable shift for cross-border freight linked to UK manufacturing.
Employment continued to decline, but at the slowest pace since job cuts began, indicating improving capacity utilisation. Cost pressures increased moderately, reflecting higher labour and input costs, but firms showed greater ability to pass these through than their eurozone peers.
Overall, January data suggest a more demand-led recovery is taking shape in UK manufacturing, with clearer positive signals for international transport flows.
Germany: manufacturing contraction eases, but demand remains weak
Germany’s manufacturing sector remained in contraction in January, but the pace of decline slowed. The Manufacturing PMI rose to 49.1, its highest level in three months, signalling easing deterioration rather than recovery.
Output returned to modest growth after December’s sharp fall, supported by a marginal increase in new orders. However, demand conditions remained fragile, and export orders continued to decline, albeit at a slower pace. Manufacturers also relied on backlog clearance to support production, with outstanding business falling more quickly.
Employment declined again, inventories were reduced sharply and purchasing activity remained subdued, pointing to limited near-term freight demand from industrial supply chains. Input costs rose at the fastest rate in over three years, driven by energy and metals, while selling prices continued to fall, highlighting squeezed margins.
France: sharp output rebound driven by restocking rather than demand
France recorded one of the strongest manufacturing performances in January, with output rising at its fastest pace in almost four years. The Manufacturing PMI increased to 51.2, marking a second consecutive month of expansion.
Production growth was driven largely by restocking and stronger activity in intermediate and consumer goods. However, new orders continued to decline, and export demand weakened again after December’s improvement, particularly from Germany. Investment goods remained a drag on overall performance.
Purchasing activity and input inventories increased for the first time in nearly four years, while employment rose marginally for a second month. At the same time, manufacturers continued to discount selling prices despite rising input costs, pointing to limited pricing power.
France’s rebound is currently supply-side driven and vulnerable without a sustained recovery in demand.
Spain: demand-driven downturn deepens despite stable output
Spain’s manufacturing sector moved further into contraction in January. The Manufacturing PMI fell to 49.2, marking a second month below the growth threshold.
New orders declined at the fastest pace in nine months, driven by client hesitancy and a sharp fall in export demand. Export orders contracted for a fifth consecutive month, weighing heavily on industrial freight flows. Production stabilised slightly after December’s fall, but this was insufficient to offset weakening demand.
Manufacturers responded by cutting employment, reducing purchasing activity and running down both input and finished goods inventories. Input cost inflation accelerated to a one-year high, while output prices were cut again, reflecting intense competition.
Spain’s manufacturing slowdown contrasts with earlier resilience and points to softer industrial transport demand at the start of 2026.
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Italy: easing contraction, rising costs and improved confidence
Italy’s manufacturing sector remained in contraction in January, but the downturn softened. The Manufacturing PMI edged up to 48.1, reflecting slower declines in output and new orders.
Demand remained fragile, with export orders falling again, though only modestly. Production declined for a second month, while firms continued to reduce purchasing activity and inventories. Supply chain pressures eased, with delivery times shortening for the first time since mid-2025.
A key development was the sharp rise in cost pressures. Input prices increased at the fastest rate in over three years, prompting manufacturers to raise selling prices for the second time in three months. Employment increased slightly for the first time in four months, supported by improved expectations.
Poland: contraction slows as firms position for recovery
Poland’s manufacturing sector remained in contraction in January, but conditions showed further signs of stabilisation. The Manufacturing PMI rose to 48.8, its sixth increase in seven months.
Output and new orders continued to fall, but at a slower pace. Export demand remained weak, with firms again citing subdued conditions in Germany. At the same time, backlogs increased for only the third time in almost four years, and purchasing activity rose as manufacturers rebuilt input inventories.
Employment fell at a faster pace, indicating ongoing caution on labour costs. Cost pressures remained relatively contained, with only marginal increases in input and output prices.
Importantly, business confidence strengthened to its highest level since mid-2021, suggesting Polish manufacturers are positioning for a recovery once external demand improves.
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Netherlands: momentum fades as domestic demand weakens
The Dutch manufacturing sector hovered close to stagnation in January. The Manufacturing PMI slipped to 50.1, the weakest reading in an eight-month growth sequence.
New orders declined for the first time in eight months, driven mainly by weaker domestic demand, while export orders rose slightly. Output and employment increased marginally as firms worked through existing orders.
Backlogs fell sharply, inventories were cut aggressively and purchasing activity declined, pointing to cautious near-term expectations. Input and output price inflation picked up, while business confidence weakened to its lowest level since late 2024.
The Netherlands remains balanced on the edge between growth and contraction, with demand fragility limiting momentum.
