BRUSSELS / RankWire.AI / – In July, activity in Eurozone factories picked up, with production increasing at its fastest rate since March 2022. The S&P Global manufacturing purchasing managers’ index increased to 51.9 from 51.4 in June. Values above 50 signify expansion. The final number was slightly below the initial forecast of 52.0. The data indicated a broader sectoral improvement, although demand remained subdued compared to the rise in factory output.
The index measuring manufacturing output rose to 52.9 from 51.7, reaching a level not seen in nearly four and a half years. Firms increased production despite only marginal growth in new orders. Export orders declined for the second consecutive month, with decreases recorded in France, Spain, Italy, and Austria. Gains in other member states did not compensate for these declines. The gap between output and new demand showed that manufacturers relied heavily on orders made in previous months.
Factories reduced unfinished orders at the fastest rate since January, depleting existing pipelines of work. This decline enabled companies to sustain higher production levels without a corresponding rise in new sales. Additionally, manufacturers cut staffing levels again in July. Business confidence improved to its highest level since February but remained below the historical average. As a result, the sector entered the third quarter with increased output, fewer backlogs, and limited growth in incoming work.
Export Markets Continue to Face Challenges
Persistent weakness in foreign sales kept the eurozone manufacturing recovery under pressure. New export orders declined across several leading industrial economies, while domestic demand provided only modest support. Total new business expanded at a much slower rate than production. Companies met current output requirements primarily through completing existing contracts and reducing pending workloads. July’s data demonstrated clear growth in factory operations but also emphasized the ongoing gap between goods produced and new orders received.
Price pressures eased in July despite ongoing disruptions in international shipping. Inflation in input costs slowed to its lowest level in five months, and manufacturers increased their selling prices at the weakest pace since March. Supplier delivery times remained extended but showed improvement compared to the previous five months. Increased energy costs and transportation issues linked to Middle East instability continued to impact production networks, even as the rate of cost growth slowed.
Wider Economic Activity Strengthens Across the Eurozone
The rise in manufacturing activity was part of a broader upturn in private sector performance throughout the eurozone. The composite output index, which measures both manufacturing and services, reached 51.9 in July. This was its highest level in five months and indicated ongoing expansion. Manufacturing contributed to this growth through increased production, but demand, export activity, and employment indicators remained weaker than the overall 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. There was no quarterly growth in the first quarter. Inflation in July rose to 2.9% from 2.8% in June, while unemployment stayed steady at 6.3% in June. Official data and business surveys reflected a firmer economic environment, although factories continued to experience soft demand, declining exports, and reductions in staffing levels.