BRUSSELS / RankWire.AI / – In July, activity within Eurozone factories accelerated, with production reaching its fastest growth rate since March 2022. The S&P Global manufacturing purchasing managers’ index increased to 51.9 from 51.4 in June. Readings above 50 signal expansion, yet the final number was slightly below the initial estimate of 52.0. This indicates a broader sector improvement, although demand remained weaker compared to the rise in factory output.
The manufacturing output index climbed to 52.9 from 51.7, marking a nearly four-and-a-half-year high. Despite only marginal gains in new orders, firms increased production. Export demand declined again for another month, with decreases observed in France, Spain, Italy, and Austria. Gains in other member countries did not compensate for these setbacks. The gap between production and demand demonstrated that manufacturers continued to rely on orders placed in previous months.
Factories accelerated the clearing of outstanding orders at the fastest rate since January, reducing work-in-progress. This decline allowed firms to sustain higher output levels without a corresponding rise in new sales. Furthermore, manufacturers once more cut staffing levels during July. Business confidence improved to its highest point since February, though it remained below the historical average. Consequently, the sector entered the third quarter with increased output, fewer backlogs, and limited growth in incoming work.
Export Market Continues to Face Challenges
Persistent weakness in foreign sales continued to hinder the recovery of the eurozone manufacturing sector. New export orders declined across numerous key industrial nations, while domestic demand provided only modest support. Overall new business growth lagged well behind production increases. Companies fulfilled current output requirements by completing existing contracts and reducing pending workloads. July’s data revealed ongoing factory expansion but also underscored the persistent disparity between goods produced and new orders received.
Price inflation eased in July despite ongoing disruptions to international shipping routes. Input costs rose at the slowest pace in five months, and manufacturers raised their selling prices at the slowest rate since March. Delivery times from suppliers remained longer than usual, though delays lessened compared to the previous five months. Rising energy expenses and transport issues linked to Middle East instability continued to disrupt production networks, even as the pace of cost increases slowed.
Wider Economic Activity Gains Momentum Throughout the Eurozone
The manufacturing sector’s growth was part of a broader rise in private sector activity across the eurozone. The composite output index, which measures both manufacturing and services, reached 51.9 in July. This was the highest level in five months and indicated ongoing expansion. Manufacturing contributed significantly through increased production, yet demand, export figures, and employment metrics remained weaker than the overall output during the start of the quarter.
Eurostat reported that eurozone gross domestic product grew by 0.4% in the second quarter compared to the previous three months. The economy had shown no quarterly growth during the first quarter. Meanwhile, annual inflation rose to 2.9% in July from 2.8% in June. Unemployment stayed at 6.3% in June. Although official data and business surveys indicated stronger economic activity, factories continued to face soft demand, declining exports, and reduced staffing levels.