The Eurozone economy stayed in growth mode through December, closing out 2025 with twelve straight months of expansion. But the last stretch came in weaker than expected. The final reading for December dropped to 51.5, down from 52.8 in November.
The numbers came from HCOB’s composite PMI, put together by S&P Global, and they still landed above the 50 line, which means the economy kept expanding. It just did it more slowly.
That slowdown didn’t stop the fourth quarter from being the strongest in more than two years. The average PMI for Q4 stood at 52.3, the highest since mid-2023.
The Eurozone hasn’t seen this kind of monthly growth streak since 2019, even while dealing with U.S. tariffs on European goods during Trump’s second term in the White House.
Services kept it going, but factories pulled back
Factories had a rough year. Manufacturing activity shrank again in December, while services managed to keep growing, though not as strongly. The services activity index dropped to 52.4, down from 53.6 the month before.
That dip shows people were still spending, just not at the same pace. Meanwhile, factory orders fell faster. It was the fifth month in a row that total new business went up, but it was also the weakest reading since September.
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said the growth likely sped up overall during the quarter.
Looking ahead, Cyrus said the service sector should stay steady in 2026, while manufacturing might get a lift from more demand for construction equipment and military hardware. “As a result, economic growth of well over 1% should be possible again, but is certainly not overwhelming,” he said.
Spain was the only bright spot. Its composite reading climbed to a two-month high. Germany didn’t fare as well, slowing to a four-month low. Italy barely scraped together any growth. France? Nothing. Its private sector activity flatlined in December.
Prices rise again, central bank holds off on cuts
Things got more expensive last month. Input costs across the Eurozone rose at the fastest rate in nine months. The price jump hit both factories and service businesses. But selling prices didn’t change much.
Cyrus said that was probably why the European Central Bank didn’t go ahead with another rate cut in December. “Cost inflation in this sector rose again,” he said, “and that’s the most important reason why the ECB has not implemented any further interest rate cuts and does not appear to be planning any.”
Job numbers ticked up a bit, but the gain was small. Manufacturing layoffs continued, and they held back bigger improvements in hiring across the region.
Markets ended the year mixed. Switzerland’s SMI dropped 0.27% to 13,210.98. Finland’s HEX added 0.53%, closing at 12,483.02. Spain’s IBEX 35 climbed 0.24%. Germany’s DAX nudged up 0.14%. France’s CAC slipped 0.4%. Italy’s FTSE MIB gained 0.36%. The broader STOXX 600 edged up 0.17% to 602.78.
Currencies stayed mostly quiet. The euro lost ground against the dollar, landing at 1.171. It dropped slightly against the yen, settled at 183.12, and held steady against the pound at 0.866.
Bond yields fell across the board. Germany’s 10-year closed at 2.851%, Italy’s at 3.505%, and France’s at 3.562%. That wrapped up a long, uneven year where the Eurozone stayed afloat thanks to services, while factories kept falling behind.
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