BERLIN, Feb 2 (Reuters) - Germany's manufacturing sector began 2026 on a positive note, with output returning to growth in January after a brief contraction in December, according to a survey on Monday.
The headline HCOB final Purchasing Managers' Index (PMI) for German manufacturing, compiled by S&P Global, rose to 49.1 in January, from 47.0 in December, a slight increase on the preliminary reading for the first month of the year of 48.7.
January's reading also marks a three-month high, though it remains below the 50.0 mark, indicating contraction. A reading above that points to growth.
The upturn was bolstered by a marginal rise in new orders, marking the first increase in three months, though employment levels in the sector continued to decline at a marked pace, reflecting ongoing reorganisations and unfilled vacancies.
"This smells a bit like a recovery could be underway," said Hamburg Commercial Bank chief economist Cyrus de la Rubia.
"Output has rebounded rather swiftly from the drop in December, optimism about future output has risen from an already high level, and new orders have ticked up a bit," he said.
With an eye to reduced employment, de la Rubia said firms that have streamlined their production processes may find themselves well positioned if demand does pick up this year.
Manufacturers remain optimistic about the year ahead, with expectations reaching a seven-month high. However, the situation remains fragile, said de la Rubia, as companies are still rapidly drawing down their inventory and backlogs are shrinking.
Input cost inflation also surged to a 37-month high, driven by rising prices for metals, energy and wages that companies have struggled to pass on to customers, said de la Rubia.
"At best, they've managed to slow the ongoing three month decline in output prices, nothing more," he added.
Reporting by Miranda Murray; Editing by Toby Chopra
Source: Reuters