Industrial Activity in the EU Closes 2025 Lower After Nine-Month Low
PMI readings below 50 in Italy and Spain signaled renewed pressure in southern Europe, while conditions in Greece improved slightly.
Quick overview
- The EU's manufacturing sector ended 2025 in contraction, despite a brief improvement in confidence indicators.
- Weakening demand, exacerbated by tariff tensions with the U.S., led to a decline in the eurozone manufacturing PMI to 48.8 in December.
- Job cuts continued as companies expressed a lack of confidence in near-term growth, with six of the eight major eurozone economies experiencing deteriorating conditions.
- France was an exception, achieving a 42-month high in manufacturing PMI, while analysts predict a gradual improvement in 2026 amid ongoing risks.
The European Union’s manufacturing sector closed 2025 in contraction, despite a brief improvement in confidence indicators toward year-end.
The downturn was driven mainly by weakening demand, in a year marked by tariff tensions with the United States under President Donald Trump.
According to data from S&P Global, the eurozone manufacturing PMI fell to 48.8 in December from 49.6 in November, marking its lowest level since March and remaining firmly below the 50-point threshold that separates expansion from contraction.
Demand for eurozone manufactured goods slowed again, reflected in a sharp decline in new orders, shrinking order backlogs, and continued inventory reductions. Against this backdrop, companies continued to cut jobs, underscoring a lack of confidence in near-term growth. Firms appear neither able nor willing to build momentum for the coming year, opting instead for caution—a stance that continues to weigh on the broader economy.
The manufacturing sector has been in near-continuous recession since mid-2022, following Russia’s invasion of Ukraine. While 2025 had been expected to mark a turning point, the slowdown eased only modestly and failed to transition into a sustainable growth trajectory.
Regional Performance and the Exception of France
Manufacturing conditions deteriorated in six of the eight major eurozone economies tracked. Germany stood out for the wrong reasons, posting the sharpest worsening in sector conditions since February of last year and the weakest performance among the countries surveyed.
PMI readings below 50 in Italy and Spain signaled renewed pressure in southern Europe, while conditions in Greece improved slightly faster than in November.
The notable exception was France, the eurozone’s second-largest economy. France bucked the regional trend, with its manufacturing PMI reaching a 42-month high, signaling the strongest expansion since June 2022.
Outlook for 2026
Industrial production volumes across the eurozone fell in December after nine consecutive months of growth, driven by a sharper decline in incoming orders. Sales performance also deteriorated for a second straight month, marking the steepest drop since early 2025.
Looking ahead, analysts expect a gradual improvement in 2026, supported by higher defense spending and Germany’s fiscal stimulus package, though risks remain elevated and a sustained recovery is far from guaranteed.
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