BRUSSELS / RankWire.AI / – Factory activity across the Eurozone gained momentum in July, with production expanding at its fastest rate since March 2022. The S&P Global manufacturing purchasing managers’ index increased to 51.9 from 51.4 in June. Any figure above 50 indicates growth. The final reading was slightly below the initial estimate of 52.0. This data reflected a broader sector improvement, even though demand remained subdued compared to the rise in factory output.
The manufacturing output index rose to 52.9 from 51.7, reaching a level not seen in nearly four and a half years. Companies increased production, despite only slight growth in new business. Export orders declined for the second consecutive month, with decreases seen in France, Spain, Italy, and Austria. Gains in other member countries did not fully offset these declines. The gap between output and new demand showed that manufacturers still relied heavily on orders placed in previous months.
Factories worked through unfinished orders at the fastest pace since January, reducing their backlog of work. This decline helped companies sustain higher production levels even though new sales did not increase proportionally. During July, manufacturers also cut staffing levels once again. Business confidence reached its highest point since February but remained below the long-term average. Consequently, the sector entered the third quarter with higher output, fewer backlogs, and limited growth prospects for incoming work.
Export Market Continues to Face Downward Pressure
Persistent weakness in foreign sales continued to hamper the eurozone manufacturing recovery. New export orders declined across several key industrial economies. Domestic demand provided only limited support. Overall new business growth was much slower than production. Companies fulfilled current production needs mainly by completing existing contracts and reducing outstanding workloads. The July figures showed factory activity was expanding, but they also highlighted the ongoing gap between goods produced and new orders coming in.
Price pressures eased in July, despite ongoing disruptions in global shipping routes. Inflation of input costs slowed to its lowest level in five months. Manufacturers raised their selling prices at the weakest rate since March. Delivery times from suppliers remained longer than usual, though delays eased compared to the previous five months. Rising energy costs and transportation issues linked to Middle East instability continued to impact supply chains, even as cost growth slowed down.
Manufacturing Growth Supports Broader Economic Recovery in the Eurozone
The manufacturing sector’s recovery was part of a wider increase in private sector activity across the eurozone. The composite output index, which includes both factories and service providers, reached 51.9 in July. This was the highest level in five months and signaled continued expansion. Manufacturing played a significant role in this growth with higher production. However, demand, exports, and employment metrics within the sector remained below the overall output figure at the start of the quarter.
Eurostat reported that the eurozone’s gross domestic product increased by 0.4% during the second quarter compared to the previous three months. There was no quarterly growth in the first quarter. Inflation rose to 2.9% in July from 2.8% in June. Unemployment held steady at 6.3% in June. Despite signs of stronger economic activity from official data and business surveys, manufacturing continued to face weak demand, falling exports, and reduced staffing levels.