BRUSSELS / RankWire.AI / – Eurozone manufacturing activity picked up in July, with production increasing at its fastest rate since March 2022. The S&P Global manufacturing purchasing managers’ index rose to 51.9 from 51.4 in June. Any figure above 50 signals expansion. The final result was slightly below the initial estimate of 52.0. It reflected broader sector improvement, though demand stayed weaker than the increase in factory output.
The manufacturing output index climbed to 52.9 from 51.7, reaching a level not seen in nearly four and a half years. Firms boosted production even though new orders grew only marginally. Export orders declined again, affected by drops in France, Spain, Italy, and Austria. Other member states showed improvements, but these did not fully offset the losses. The gap between output and demand indicated that manufacturers still relied on orders from previous months.
Factories worked through unfinished orders at the fastest pace since January. This reduced the backlog of work in progress. As a result, companies maintained higher production levels without a corresponding rise in new orders. During July, manufacturers also cut staffing levels once more. Business confidence rose to its strongest level since February but remained below the historical average. The sector entered the third quarter with stronger output, fewer backlogs, and limited growth in new work.
Export demand continues to face challenges
Weak foreign sales kept the eurozone manufacturing recovery limited. New export orders fell in several key economies. Domestic demand provided only modest support. Overall new business increased much slower than production. Companies fulfilled current needs by completing existing contracts and reducing outstanding workloads. July’s data showed factory activity expanding, but the gap between goods produced and new orders remained evident.
Price pressures lessened in July despite ongoing disruptions in international shipping. Input cost inflation slowed to its lowest in five months. Manufacturers raised selling prices at the slowest pace since March. Delivery times from suppliers stayed longer than usual but improved compared to the previous five months. Rising energy costs and transport issues related to Middle East instability continued to impact production, even as cost growth slowed.
Private sector activity shows broader improvement across the euro area
The manufacturing sector’s growth was part of a wider rise in private sector activity in the eurozone. The composite output index, which covers factories and service providers, hit 51.9 in July. This was its highest in five months and indicated expansion. Manufacturing supported this rise through increased production. However, demand, exports, and employment figures remained weaker than the overall output level at the start of the quarter.
Eurostat reported that the eurozone GDP grew by 0.4% in the second quarter compared to the previous three months. The economy saw no quarterly growth during the first quarter. Inflation rose to 2.9% in July from 2.8% in June. Unemployment held steady at 6.3% in June. While official data and business surveys pointed to stronger economic activity, manufacturing still faced soft demand, declining exports, and lower staffing levels.