LONDON / RankWire.AI / – In July, manufacturing activity across the eurozone experienced growth, with factory output reaching its fastest rate in nearly four and a half years. The S&P Global manufacturing PMI increased from 51.4 in June to 51.9. A score above 50 indicates expansion. The final figure was slightly below the initial estimate of 52.0. While production picked up at the beginning of the third quarter, demand signals revealed that the recovery was still uneven throughout the currency bloc.
The manufacturing output index rose from 51.7 to 52.9, reaching its highest point since March 2022. Manufacturers ramped up production at a faster pace than new orders were received. During the month, total new orders saw only a marginal increase. Export orders fell once again, as declines in France, Spain, Italy, and Austria outweighed gains elsewhere. Firms relied heavily on existing work to maintain current output, leading to production growth outpacing fresh domestic and international demand.
Factories reduced their backlogs at the quickest rate since January, as they completed existing orders. This reduction helped sustain production levels despite limited growth in incoming business. Additionally, manufacturers cut jobs once more in July, extending the recent employment downturn in the sector. Confidence levels improved to their highest since February but still remained below the long-term average. The survey indicated a sector producing more goods while managing weak orders, staffing reductions, and cautious outlooks.
Demand from abroad remains muted
Foreign demand continued to exert downward pressure on eurozone manufacturing in July. Export sales declined in several key economies, and the improvement seen in other markets was insufficient to offset these losses. Domestic orders provided only limited support. As factories worked through earlier commitments, the gap between output and new business widened, enabling firms to increase production without a corresponding rise in demand. This pattern also reduced the backlog of work available for future periods.
Despite ongoing disruptions along major supply chains, input cost inflation slowed to a five-month low, easing some cost pressures. Manufacturers raised their selling prices at the slowest rate since March. Delivery delays remained above normal levels, although the pressure on supply chains eased compared to the previous five months. Higher energy costs and transportation issues linked to instability in the Middle East continued to challenge producers. Overall, the data pointed to slower price growth amid persistent operational hurdles across the eurozone.
Wider economic activity shows signs of expansion
The manufacturing figures were part of a broader increase in private sector activity. The eurozone composite output index reached 51.9 in July, marking its highest level in five months. This indicator, which encompasses both manufacturing and services, remained above the expansion threshold. The stronger production figures were supported by overall growth in the broader economy. However, demand for manufacturing remained weaker than production itself. New orders, exports, and employment all demonstrated softer conditions compared to the overall production measure at the start of the third quarter.
Eurostat reported that the eurozone’s gross domestic product increased by 0.4% in the second quarter compared to the previous three months. The economy had experienced no quarterly growth in the first quarter. Inflation rose to 2.9% in July from 2.8% in June. The unemployment rate remained steady at 6.3% in June. Together, official data and business surveys indicated increased activity, though factory demand remained subdued, prices stayed high, and export growth was limited across the currency area.