Eurozone industrial output weakened in January, slipping to its lowest level in just over a year, ING Economics reported on Friday. Production declined 1.5% month-on-month in January, following a 0.6% decrease in December.
Major manufacturing economies in the bloc recorded contractions. Germany, Italy and Spain each posted month-on-month falls. ING highlighted a sharp reduction in Irish production, a component it described as notoriously volatile, which amplified the overall headline decline.
ING noted that consecutive monthly drops have undone much of the relative strength that emerged through 2025, when industrial output generally ran above 2024 levels. The January print represented the weakest production figure in 13 months.
ING tied the deterioration in part to renewed conflict in the Middle East, saying the developments have lifted energy costs and disrupted supply chains. The bank said the situation is "currently clearly serving as an industrial decelerator," with the combination of higher energy prices and logistical frictions hitting energy-intensive industries most acutely.
Those energy-intensive sectors have not fully recovered from the 2021-22 energy price shock, ING said, leaving them exposed to a second sustained upswing in costs. By contrast, sectors that are less sensitive to energy costs were able to expand during the earlier shock, but ING cautioned that the resilience in those areas may be insufficient to offset prolonged pressure on heavy manufacturing if elevated costs persist.
Bert Colijn, ING's chief economist for the Netherlands, summed up the shift in mood: "Just as optimism had returned to manufacturing, geopolitics is clearly putting downside risk back on the table." The comment underscores how external developments have reversed some of the gains in sentiment among manufacturers.
Expectations for a manufacturing rebound had been supported in part by hopes for increased public spending on defence and infrastructure. ING acknowledged that the European Commission has made progress on implementing its Industrial Accelerator Act but warned that another large jump in energy prices could be "enough of a drag on manufacturing to pour cold water" on recovery prospects, particularly for heavy industry.
ING's assessment of the January data concluded that "recent optimism among manufacturers has not exactly been justified by production data." The bank's analysis emphasizes that geopolitical-driven energy cost pressures and supply chain disruptions present a clear risk to the nascent recovery in industrial output across the eurozone.