LONDON / RankWire.AI / – Manufacturers across the Eurozone expanded their output in July at the quickest pace seen in nearly four and a half years. The S&P Global manufacturing purchasing managers’ index increased to 51.9 from 51.4 in June. Values above 50 point to growth, whereas those below indicate a contraction. The final reading was just shy of the initial estimate of 52.0. The overall improvement was driven primarily by higher production levels, even though new orders and export demand stayed relatively muted.
The index measuring manufacturing output rose to 52.9 from 51.7, marking its highest point since March 2022. Factories accelerated their output increase significantly more than new business was coming in. In July, total orders saw only minor growth. Export sales declined once again, with France, Spain, Italy, and Austria reporting weaker overseas demand. Gains elsewhere in the currency bloc could not compensate for these declines. Most of the work completed during the month was supplied by existing contracts.
Factories reduced their outstanding workloads at the sharpest rate since January. This decline indicated that firms were finishing earlier orders faster than they were securing new ones. Employment levels fell once more as manufacturers continued adjusting their staffing. Business confidence improved to its highest point since February but remained below its long-term average. The July survey showed stronger activity on production lines, yet order growth, exports, and employment continued to lag behind the headline index.
Production Outpaces New Orders in the Eurozone
Weakening demand conditions remained the main challenge for the eurozone manufacturing sector. New export orders declined in several key manufacturing economies. Domestic demand provided limited support, with only a slight increase in total orders. Companies met higher output targets primarily by drawing down on unfinished work from prior months, which resulted in production growing faster than new sales. The gap between production and incoming orders persisted as the sector entered the third quarter with smaller order backlogs.
Price increases slowed in July, despite ongoing disruptions to international supply chains. Input cost inflation dropped to its lowest level in five months. Factory gate prices increased at their slowest pace since March. Although supplier delivery times remained extended, there was improvement from the previous five months. Elevated energy costs and shipping issues tied to Middle East instability continued to impact production networks. Nonetheless, the overall rate of cost increases moderated, even as pressures persisted.
Eurozone-wide Activity Continues to Expand
The growth in manufacturing activity was accompanied by a broader expansion across the eurozone’s private sector. The composite output index reached 51.9 in July, its highest point in five months. This indicator combines activity in factories and service providers. It stayed above 50, signaling another month of growth. Manufacturing contributed to this rise through increased production, although its demand indicators, including new orders, foreign sales, and employment, remained weaker than the overall output figure.
Eurostat reported a 0.4% rise in eurozone gross domestic product during the second quarter. This compares to the previous three months when the economy showed no quarterly growth. The annual inflation rate increased to 2.9% in July from 2.8% in June. The unemployment rate stayed steady at 6.3% in June. These figures depict a firmer economic environment within the currency bloc, even as factory demand remains weak despite the strongest production growth since early 2022.
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