Key manufacturing data from major economies, including the U.S., China, Japan, and the Eurozone, revealed continued divergence in global manufacturing performance in 2025 January.
The U.S. manufacturing activity returned to expansion after months of contraction, driven by strong new orders and production, signaling continued demand recovery. In contrast, the Eurozone's contraction showed signs of easing, but weak demand and geopolitical uncertainties kept overall performance subdued.
In Asia, China fell back into contraction after three months of expansion due to seasonal Lunar New Year effects and underwhelming policy impact. Japan remained in contraction for the seventh consecutive month, though businesses remained cautiously optimistic about the future. Meanwhile, South Korea returned to expansion, supported by external demand recovery, though domestic economic prospects remain uncertain, with businesses maintaining a cautious outlook on the timing of a full recovery.
United States PMI: Demand Returns to Expansion, Sustainability Still in Question
The U.S. manufacturing PMI for January stood at 50.9 (prior: 49.2), marking an end to nine consecutive months of contraction and reaching its highest level since September 2022.
In the sub-index, the new orders index rose for the fifth consecutive month, climbing to 55.1 (prior: 52.1), while the production index returned to expansion at 52.5 (prior: 49.9), the highest level since March last year.
The inventory index declined further to 45.9 (prior: 48.4), and the spread between new orders and customer inventories widened to 8.4 (prior: 5.4). Supplier delivery times increased to 50.9 (prior: 50.1), all indicating an accelerating pace of demand recovery.
Company surveys revealed that most businesses reported continued demand improvement, in some cases exceeding previous years' levels. However, some of this rebound may reflect preemptive demand releases ahead of Trump's tariff policies, making the sustainability of expansion a key factor to watch going forward.
Euro Area PMI: Contraction Persists but Shows Signs of Easing; Business Optimism at Its Highest Since February 2022
The Eurozone's January Markit PMI came in at 46.6 (prior: 45.1), reflecting a slight easing in contraction across new orders, production, and inventories. However, employment remained weak, with layoffs accelerating and backlog orders continuing to decline, indicating ongoing weak demand. Input prices rose for the first time since August 2023, but businesses refrained from passing costs onto customers, keeping output prices flat and halting four months of consecutive declines.
- Germany: The January Markit PMI stood at 45.0 (prior: 42.5). Despite challenges from U.S. tariff policies, parliamentary elections, and rising corporate insolvency risks, new orders and production continued to contract but at a slower pace. Employment remained in contraction for the 19th consecutive month, and backlog orders hit a 2.5-year low. However, with lower interest rates and post-election economic stabilization expectations, business sentiment improved significantly, pushing production expectations to a three-year high.
- France: The January Markit PMI came in at 45.0 (prior: 41.9). Although new orders and production continued to decline, the pace of contraction moderated slightly, with some firms reporting a slight recovery in customer interest. However, businesses continued to reduce procurement activities, preferring to use existing inventories to maintain cash flow. Hiring remained weak, and backlog orders continued to decline, albeit at a slower pace. Business sentiment remained pessimistic due to domestic political instability and concerns over weak demand.
- Italy: The January Markit PMI stood at 46.3 (prior: 46.2). Weak demand persisted, exacerbated by political instability in Germany and France and concerns over U.S. tariffs, leading to a sharp drop in new orders. However, the negative impact was partially offset by a slower pace of contraction in production, employment, and inventories. Backlog orders continued to decline amid ongoing layoffs, yet firms remained optimistic that political stability in key trading partners would gradually improve.
China PMI: Three-Month Expansion Ends, Urgency for Policy Stimulus Increases
China’s January manufacturing PMI stood at 49.1 (prior: 50.1), falling back into contraction and missing market expectations of 50.1.
In the sub-index, production fell to 49.8 (prior: 52.1), and new orders declined to 49.2 (prior: 51.0), both returning to contraction due to seasonal Lunar New Year effects. Inventories fell to 47.7 (prior: 48.3), while employment remained in contraction at 48.1. The spread between new orders and customer inventories declined further to 2.7 (prior: 3.1).
Historically, January production and new orders typically decline by 0.3–0.8 percentage points due to seasonal factors, but this year, the declines were 2.3 and 1.8 percentage points, respectively, indicating weaker-than-expected policy stimulus effects. Meanwhile, the U.S.-China trade war has re-escalated, further increasing pressure on China’s government to expand fiscal stimulus efforts this year.
Japan PMI: Seventh Consecutive Month of Contraction, Business Sentiment at a Two-Year Low
Japan’s January manufacturing PMI stood at 48.7 (prior: 49.6), marking its seventh consecutive month of contraction.
New orders and production declined further, with surveyed firms reporting continued weakening of customer confidence, particularly in automotive and semiconductor sectors. Although employment expanded for the second month, backlog orders continued to decline rapidly, reflecting persistently weak demand and short- to medium-term uncertainty.
While businesses remain optimistic about a long-term recovery, concerns over the timing of demand rebound pushed business sentiment to its lowest level in nearly two years.
South Korea PMI: External Demand Recovery Drives Expansion, Domestic Recovery Uncertain
South Korea’s January manufacturing PMI stood at 50.3 (prior: 49.0), returning to expansion for the first time in months.
New orders and production marginally rebounded, benefiting from improved international demand. New export orders expanded for the third consecutive month, and backlog orders hit a 31-month high.
Inflationary pressures continued to intensify, with import prices reaching their highest level since July 2022, forcing businesses to pass higher costs onto consumers to maintain profit margins.
While business expectations for future production turned positive again, uncertainty over domestic economic recovery remained high.
Global Manufacturing PMI Overview
Overall, global manufacturing remains divided:
- The U.S. returned to expansion, repeatedly hitting recent highs.
- Europe remains in contraction but shows clear signs of easing.
- China fell back into contraction due to seasonal and policy inefficacy.
- Japan continued its prolonged downturn.
- South Korea turned to expansion thanks to external demand recovery.
With the U.S. administration transitioning, global trade dynamics face a new turning point. Many countries have voiced concerns over U.S. tariff policy uncertainties, suggesting that future global manufacturing demand will heavily depend on the implementation or negotiation of Trump’s trade policies. Additionally, Europe must monitor political stability in Germany and France, while China faces the dual challenge of external pressures and domestic stimulus effectiveness. These factors will play a critical role in shaping regional demand trajectories moving forward.