LONDON / RankWire.AI / – In July, manufacturing activity across the Eurozone experienced growth, with factory output hitting its highest level in nearly four and a half years. The S&P Global manufacturing PMI increased to 51.9 from 51.4 in June. An index reading above 50 indicates expansion. The final figure was slightly below the initial estimate of 52.0. While production picked up at the start of the third quarter, demand signals suggested that the recovery was still uneven throughout the currency bloc.
The factory output index climbed from 51.7 to 52.9, marking the highest point since March 2022. Manufacturers ramped up production at a faster rate than they secured new orders. During the month, total new orders experienced only a modest increase. Export orders declined once again, as weakness in France, Spain, Italy, and Austria outweighed improvements elsewhere. Companies relied heavily on existing work to sustain current output, resulting in production growth outpacing new demand from both domestic and international markets.
Factories reduced their backlogs at the quickest pace since January by completing pending orders. This decline in unfinished work helped maintain overall production despite limited growth in new incoming orders. Additionally, manufacturers cut jobs again in July, extending the sector’s recent employment downturn. Although confidence in the sector improved to its strongest since February, it remained below the long-term average. The survey indicated that the industry was producing more goods while managing weak orders, staffing reductions, and cautious business outlooks.
New orders stay subdued
During July, foreign demand continued to exert downward pressure on eurozone manufacturing. Export sales declined across several key economies, and any gains in other markets did not compensate for these losses. Domestic orders contributed only modestly. As factories worked through existing commitments, the gap between output and new business widened. This pattern allowed production to rise without a corresponding increase in demand, and it also led to a reduction in the backlog of unfinished work, impacting activity in subsequent periods.
Despite ongoing disruptions along major supply routes, input cost pressures eased during the month. Inflation in input prices slowed to a five-month low, and manufacturers increased their selling prices at the slowest rate since March. Delivery delays persisted above normal levels, although the pressures eased from the previous five months. Higher energy costs and transportation issues linked to instability in the Middle East continued to pose challenges. Overall, the data indicated slower price growth amid persistent operational difficulties faced by producers across the eurozone.
Broader economy demonstrates signs of expansion
The manufacturing data was part of a wider increase in private sector activity. The eurozone composite output index reached 51.9 in July, its highest in five months. This measure, which includes both manufacturing and services sectors, remained above the expansion threshold. The growth in the broader economy supported the stronger production figures, although manufacturing demand remained weaker than output. During the start of the third quarter, new orders, exports, and employment all showed signs of softer conditions compared to the overall production measure.
Eurostat data revealed that eurozone 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 in July rose to 2.9% from 2.8% in June, while the unemployment rate remained steady at 6.3% in June. The combined official statistics and business surveys indicated ongoing activity growth, despite continued pressures from weak factory demand, rising prices, and limited export growth within the currency area.