LONDON (Reuters) - The euro zone's beleaguered manufacturing industry showed some signs of stabilisation at the start of the year as firms brushed off rising costs and the threat of U.S. tariffs to become more upbeat about the outlook, a survey showed.
HCOB's final euro zone manufacturing Purchasing Managers' Index, compiled by S&P Global, climbed to 46.6 in January, ahead of a preliminary estimate for 46.1 and closer to the 50 mark separating growth from contraction.
The headline reading, which has been sub-50 since mid-2022, fell to 45.1 in December.
An index measuring output, which feeds into a composite PMI due on Wednesday and is seen as a good guide to economic health, bounced to 47.1 from 44.3.
"It's definitely too early to talk about green shoots in the manufacturing sector, but we see the increase in the HCOB PMI as a first step towards stabilisation, ending two months of the deepening of the recession," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
U.S. President Donald Trump has proposed a 10% tariff on all imports from the 20-member currency union which would make European goods more expensive for Americans and likely hurt demand.
However, a near three-year stretch of falling demand eased and the new orders index rose to an eight-month high of 45.4 from 43.0.
The European Central Bank cut interest rates again on Thursday and left the door open for a further reduction in March, potentially cutting borrowing costs for businesses and boosting consumers' disposable income.
While firms continued to reduce headcount, optimism about the year ahead rose above its long-term average to its highest in nearly three years.
"Confidence in the future has made a remarkable jump," de la Rubia said. "Maybe there's hope that the lethargy is ending."
(Reporting by Jonathan Cable; Editing by Christina Fincher)
