Prior 49.6Euro area manufacturing activity slumped in December with the headline reading being a 9-month low amid a fresh decline in output. Demand conditions are showing renewed weakness with new orders falling at the quickest pace in almost a year. Overall business optimism is still being retained with the contraction here being a relatively mild one at least. We'll have to see how things go at the start of 2026 to be sure of the trend for the economy next.On the inflation front, there is a bit of a hiccup with the rate of input cost inflation nudging up to a 16-month high. So, that will be something that ECB policymakers will have to be mindful of. HCOB notes that:“Demand for manufactured products from the eurozone is slowing down again. Significantly fewer orders, declining orderbacklogs, and continued inventory reduction are the most obvious indicators of this. It is not surprising that companies arecontinuing to cut staff in this environment. Companies seem neither able nor willing to build momentum for the coming year,but are instead exercising caution, which is poison for the economy.“The manufacturing sector has been in recession almost continuously since mid-2022. 2025 was shaping up to be the yearwhen the economy in this sector could turn around. In fact, the downturn did ease considerably, but it did not manage to shiftto a sustainable growth trajectory. For 2026, however, there is hope that Germany's economic stimulus program and risingdefence spending across Europe will breathe new life into the industry. Many companies obviously see it this way too, asconfidence that production will be higher in a year's time than it is today has risen again from an already high level.“Input prices have risen for the second month in a row. This cannot be due to energy prices, as oil and natural gas prices fellin December. However, industrial metals such as copper and tin saw a sharp rise after already increasing in price at doubledigit rates over the course of the year. Nevertheless, it is surprising that, despite the weak economic situation, companiesare apparently unable to enforce lower prices for goods with prices that are less dependent on the global market. Oneexplanation could be supply-chain problems, as indicated by longer delivery times. In short, things are not running smoothly.“There were some surprising regional developments in December. Spain's manufacturing sector, which had been expandingalmost continuously since 2024, has now slipped slightly into decline. France's manufacturers, on the other hand, whichhave practically been in decline for three years, are showing signs of life again in December. The sharp slump in Germanand Italian industry is another disappointment. The relatively good performances in Greece and Ireland cannot compensatefor this. Overall, it will not be easy for the manufacturing sector of the eurozone to gain a foothold in 2026. However,expansionary fiscal policy could help.” This article was written by Justin Low at investinglive.com.