The eurozone manufacturing sector grew at the lowest rate in three months in January, as growth rates in output and new orders eased from near-record highs at the end of 2017, final Purchasing Managers' Index data from IHS Markit showed.
The bloc's manufacturing PMI fell to 59.6 in January, in line with the flast estimate, from the prior month's record high of 60.6. A PMI score of more than 50 indicates expansion.
Inflationary pressures picked up at the start of 2018, with both output charges and input prices rising at faster rates. Output price inflation accelerated to an 80-month high.
"The hike in prices associated with the further shift to a sellers' market for many goods was accompanied by a steep rising in oil prices during the month, resulting in a further intensification of cost pressures," said Chris Williamson, chief business economist at IHS Markit.
"With higher costs being increasingly passed on to customers, the survey sends a warning signal for a potential rise in future consumer price inflation."
Business confidence hit record high as optimism increased in all countries in the bloc, except Germany and Austria.
Consumer goods saw an accelerated growth during January, with growth across the intermediate and investment goods categories too. Manufacturing employment in the euro area rose for the 41st consecutive month in January while companies indicated solid inflows of new business in the domestic market.
The level of new export orders rose at the lowest pace in three months.
In France, the manufacturing PMI reached 58.4 in January, slightly down from the 58.8 figure for the prior month. Despite the month-over-month decline, the index signaled one of the steepest improvements in business sentiments since April 1998. A rise in new orders helped buoy employment though backlogs of unfinished work accumulated further and at the sharpest pace for over 11 years.
Germany's manufacturing sector PMI also slipped in January to 61.1 from its record-high of 63.3 in December 2017, final data from IHS Markit/BME showed. Output, new orders and employment grew at a slower pace as capacity pressures prevailed. Manufacturers noted a considerable increase in average delivery times for purchases while backlogs of work increased during the month.
"A key insight from the latest survey was a pick-up in price pressures to the highest seen since early 2011, as a continued supply-side squeeze inflated purchasing costs and prices charged at the factory gate," IHS Markit principal economist Phil Smith said.
Manufacturers stayed strongly optimistic about the outlook for output in Germany, though slightly less so than in December 2017.
Meanwhile, Italy's headline manufacturing PMI rose to a seven-year high of 59.0 in January, up from 57.4 in December 2017.
