BRUSSELS / RankWire.AI / – In July, activity within Eurozone manufacturing sectors picked up speed, with production levels reaching their fastest since March 2022. The S&P Global manufacturing purchasing managers’ index increased from 51.4 in June to 51.9. A reading above 50 signifies expansion. The final figure was slightly below the initial estimate of 52.0. This outcome indicated a broader sectoral improvement, though demand remained subdued compared to the rise in factory output.
The index measuring manufacturing output climbed to 52.9 from 51.7, marking nearly four and a half years of high growth. Despite only marginal gains in new orders, companies continued to increase production. Export orders declined for a successive month, with decreases seen in France, Spain, Italy, and Austria. Gains in other member states did not compensate for these setbacks. The gap between output and demand suggested manufacturers relied heavily on orders placed in previous months.
Factories expedited the clearing of unfinished orders at the fastest rate since January, reducing their existing backlog. This decrease supported higher production levels without an equivalent rise in new business. During July, manufacturers also cut staffing again. Business confidence rose to its strongest level since February but remained below the long-term average. As the third quarter began, the sector entered with increased output, lower backlogs, and limited growth in incoming orders.
Persistent Weakness in Export Markets
Foreign demand continued to hinder the recovery of manufacturing within the eurozone. New export orders declined across several major industrial economies, while domestic demand provided only slight support. The total new business growth was considerably slower than production increases. Companies managed current output levels primarily by completing existing contracts and reducing pending workloads. July’s data showed a clear expansion in factory activity but also underscored the ongoing disparity between goods produced and new orders received.
Price pressures diminished in July, despite ongoing disruptions in global shipping routes. Input cost inflation slowed to its lowest point in five months. Manufacturers increased their selling prices at the weakest rate since March. Although supplier delivery times remained extended, delays eased when compared to the previous five months. Rising energy costs and transport disruptions associated with Middle East instability continued to impact supply chains, even as cost growth slowed down.
Eurozone Economy Shows Signs of Strengthening
The improvement in manufacturing was accompanied by an overall increase in private sector activity across the eurozone. The composite output index, which encompasses both factories and service providers, reached 51.9 in July. This was the highest in five months and confirmed ongoing expansion. Manufacturing contributed significantly to this growth via increased production, although demand, export activity, and employment metrics remained weaker than the overall output figure at the start of the quarter.
Eurostat reported a 0.4% rise in eurozone gross domestic product during the second quarter compared to the previous three months. The economy had shown no quarterly growth in the first quarter. Inflation in July increased to 2.9% from 2.8% in June, while unemployment stayed steady at 6.3%. Despite these positive signals from official data and business surveys, manufacturing continued to face weak demand, declining exports, and staffing reductions, highlighting ongoing economic challenges.