Euro area: January flash PMIs point to ongoing output growth

Euro area composite PMI remained stable in January at 51.5 but below the average registered in Q4 at 52.1 ( chart 1 ) . T he manufacturing sector experienced an improvement, closing the gap with the 50 thresholds at 49.4, up from 48.8, while the services index slightly declined to 51.9 from 52.4 in December. Sub-components of the composite index indicate a slowdown in new orders, still above but flirting with the 50 thresholds , while future production (at 61.5 , a 21-month high, chart 2 ) has rebounded significantly, resuming its upward trend. The figures released today align with our expectations of sustained economic activity for the first quarter likely a result of the ramp-up of the German fiscal plan , among other factors . Our PMI based-model ( chart 3 ) – which tend s to underestimate growth in recent quarters - anticipated Euro area GDP growth of 0.2% Q/Q in Q1 26 after +0.3% in Q4 25 while our Nowcasting model expects a GDP growth of 0.4% Q/Q in Q1 after 0.3% in Q4 . Germany : January's PMI rebounded after two months of decline, rising to 52.5 from 51.3 in December, beating expectations. Both the manufacturing and services sectors improved this month standing at 48.7 (+ 1.7 pts) and 53.3 (0.6 pt), respectively. The sub-components of the composite index indicate significant increases in new orders, export orders, future output, and output prices, all of which are above the 50 thresholds (except for export orders, which now stand at 49.7 after 46.7). Lastly , the composite employment index saw a sharp decline this month, dropping to 45.9 from 49.7 in December. Overall, figures released today aligns with better economic momentum compared with last quarter (preliminary estimates at 0.2% Q/Q for Q4 25 ) . France : The French Composite PMI fell to 48.6 in January from 50.0 in December , below the 50 thresholds for the first time since October 2025 , in a context where clients show hesitancy to place orders amid the political deadlock according to the statement . The Services PMI declined sharply to 47.9 (a 9-month low) from 50.1, while the Manufacturing PMI increased to 51 from 50.7, reaching a 43-month high. T he message from the PMIs regarding the French economy is significantly more negative than that from the Insee surveys , which are consistent with a growth rate of 0.3% per quarter .