BRUSSELS / RankWire.AI / – In July, manufacturing activity within the Eurozone experienced an uptick, with production increasing at the fastest rate observed since March 2022. The S&P Global purchasing managers’ index for the manufacturing sector rose from 51.4 in June to 51.9. Any figure above 50 signifies expansion. Although the final number was slightly below the preliminary estimate of 52.0, the data indicated a broader sectoral improvement, even as demand remained subdued compared to the growth in factory output.
The index measuring manufacturing output climbed to 52.9 from 51.7, reaching a level not seen in nearly four and a half years. Producers increased their output despite only marginal growth in new orders. Meanwhile, export orders declined again for a second consecutive month, affected by downturns in France, Spain, Italy, and Austria. The improvement observed in other member states did not fully compensate for these setbacks. The disparity between output and demand suggested that manufacturers continued to rely heavily on orders placed in previous months.
Unfinished orders were cleared at the fastest pace since January, reducing the backlog of work and the work in progress. This decline helped companies sustain higher production levels without a corresponding rise in new orders. Additionally, factories reduced their staffing levels once more during July. Business confidence rose to its highest level since February; however, it still remained below its historical average. As a result, the sector entered the third quarter with increased output, fewer backlogs, and only limited growth in incoming work.
Export demand continues to face challenges
The recovery of the Eurozone manufacturing sector was further constrained by ongoing weak foreign sales. New export orders across several major economies declined, with domestic demand providing only modest support. Overall, new business growth lagged behind production expansion, as firms relied on fulfilling existing contracts and reducing outstanding workloads to meet current output levels. July’s data reflected continued factory expansion, yet also underscored the persistent gap between goods produced and new orders coming in.
Despite ongoing disruptions in international shipping routes, price pressures eased somewhat during July. Input cost inflation slowed to its lowest level in five months, and manufacturers raised their selling prices at the slowest pace since March. Longer supplier delivery times persisted, though delays eased compared to the previous five months. Rising energy costs and transportation issues linked to Middle East instability continued to impact production networks, even as the rate of cost growth moderated.
Economic activity gains momentum across the euro area
The rise in manufacturing was part of a broader expansion in private sector activity across the Eurozone, with the composite output index, which includes both manufacturing and services, reaching 51.9 in July. This marked its highest level in five months and kept the measure within the growth territory. Manufacturing contributed to this overall increase through higher production levels, although demand, export activity, and employment indicators remained weaker than the headline output figure at the start of the quarter.
Eurostat reported that the Eurozone’s gross domestic product grew by 0.4% in the second quarter compared to the previous three months. In contrast, there was no quarterly growth during the first quarter. Inflation on an annual basis increased slightly to 2.9% in July from 2.8% in June. The unemployment rate held steady at 6.3% in June. While official data and business surveys pointed to a firmer economic outlook, factories continued to face weak demand, declining exports, and reductions in staffing levels.