LONDON / RankWire.AI / – In July, manufacturing activity across the Eurozone experienced growth, with factory output reaching its quickest rate in nearly four and a half years. The S&P Global manufacturing PMI increased to 51.9 from 51.4 in June. A figure above 50 indicates expansion. Although the final figure was slightly below the initial estimate of 52.0, production saw an uptick at the beginning of the third quarter, even as demand signals suggested that the recovery was still uneven within the currency bloc.
The index measuring factory output rose to 52.9 from 51.7, marking its highest level since March 2022. Manufacturers accelerated production faster than they received new orders. Meanwhile, the total volume of new orders only saw a marginal increase during the month. Export orders, however, declined once again, with weaknesses in France, Spain, Italy, and Austria outweighing improvements in other regions. Companies relied on existing work to sustain current production levels, resulting in output growth outpacing fresh demand from both domestic and international clients.
As they cleared backlog, factories reduced pending work at the fastest pace since January. This decline in uncompleted orders helped maintain production levels despite a limited rise in incoming business. During July, manufacturers also continued to cut jobs, extending the recent downward trend in employment within the sector. Although business confidence improved to its strongest point since February, it still remained below the long-term average. The survey highlighted a sector producing more goods while simultaneously managing weak orders, staffing reductions, and cautious outlooks for future activity.
Subdued new orders persist
Demand from abroad continued to dampen manufacturing performance in the eurozone during July. The export sales declined across several major economies, with improvements in other markets unable to offset these setbacks. Domestic orders provided only modest support. The gap between production and new business widened as factories processed earlier commitments. This pattern allowed companies to increase output without a corresponding rise in demand. Additionally, the level of unfinished work declined, limiting activity in subsequent reporting periods.
Cost pressures eased during the month, despite ongoing disruptions along key supply routes. Input price inflation slowed to its lowest point in five months. Manufacturers raised their selling prices at the slowest pace since March. Delivery delays remained above normal, although pressures eased compared to the previous five months. Challenges such as higher energy costs and transportation issues related to instability in the Middle East persisted. The data indicates a slowdown in price growth amid ongoing operational difficulties faced by producers throughout the eurozone.
Economic activity across the broader region expands
The manufacturing data formed part of a wider 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 covers both manufacturing and services, remained above the threshold for expansion. The overall economic growth supported the stronger production figures; however, demand in manufacturing remained weaker relative to output. During the first month of the third quarter, new orders, exports, and employment all showed signs of softness compared to the headline production index.
Eurostat reported that the eurozone’s gross domestic product increased by 0.4% in the second quarter compared to the previous three months. This followed no quarterly growth in the first quarter. Additionally, annual inflation rose to 2.9% in July from 2.8% in June, while the unemployment rate remained steady at 6.3% in June. The official figures, combined with business surveys, point toward stronger activity overall but still reflect continued weakness in factory demand, elevated prices, and limited export growth across the currency area.