Global manufacturing closed 2025 with sharply different regional outcomes. While the euro zone slipped deeper into contraction, key Asian economies regained momentum, supported by stronger exports and rising demand for artificial intelligence related technologies.

These contrasting trends highlight a shifting global manufacturing landscape one shaped by technology investment, trade dynamics, and regional resilience.

Manufacturing conditions across the euro zone deteriorated further in December. According to private surveys, production declined for the first time in ten months, reflecting ongoing weakness in new orders and cautious business sentiment.

The HCOB Eurozone Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, fell to 48.8 in December, down from 49.6 in November. This marked the lowest reading in nine months and remained below the 50 threshold that signals expansion.

The slowdown was broad-based across the region. Germany, the euro zone’s largest economy, recorded the weakest performance among the countries surveyed, with its PMI falling to a ten month low. Italy and Spain also slipped back into contraction.

“Demand for manufactured products from the euro zone is slowing again,” noted Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. Companies are exercising caution rather than building momentum, which weighs heavily on economic growth.

France stood out as a relative bright spot. Its manufacturing PMI rose to a 42 month high, suggesting pockets of resilience despite the broader regional downturn.

Outside the euro zone, the United Kingdom showed stronger performance. Manufacturing activity expanded at its fastest pace in 15 months, supported by recovering demand following recent fiscal measures.

In contrast to Europe, Asia’s major manufacturing hubs ended the year with renewed strength. Factory activity rebounded across several economies, driven by rising export orders and sustained global demand for AI related hardware.

Taiwan and South Korea, two of the world’s leading semiconductor producers, returned to expansion after months of decline. Taiwan’s PMI rose to 50.9 in December from 48.8 in November, marking its first expansionary reading in ten months. South Korea’s PMI increased to 50.1 from 49.4, supported by the strongest rise in new orders since late 2024.

Manufacturers in both economies cited new product launches, improving overseas demand, and rising confidence in the outlook. As a result, firms increased hiring and purchasing activity. Official data also showed South Korean exports exceeded expectations in December, reinforcing its role as a bellwether for global trade.

China’s factory activity also surprised to the upside, helped by a pre-holiday surge in orders. Across Southeast Asia, most economies sustained solid growth, although Indonesia and Vietnam reported modest slowdowns. India’s manufacturing sector eased to its slowest growth in two years, but remained the strongest performer in the region.

Economists note that Asia continues to benefit from two powerful forces,strong global demand for AI enabled technologies and a shift in U.S. sourcing away from China toward other Asian exporters.

The end of year data reveal a clear divergence in global manufacturing performance. Europe faces persistent headwinds from weak demand and cautious investment, while Asia is gaining traction through technology driven growth and export competitiveness.

For executives and policymakers, the message is clear. Long-term resilience will depend on investment in advanced manufacturing, alignment with fast growing technology sectors, and strategic positioning within evolving global supply chains.

As 2026 begins, the gap between regions that are adapting quickly and those that are struggling to regain momentum is becoming increasingly clear.

Source: Reuters