BRUSSELS / RankWire.AI / – Eurozone manufacturing activity gained momentum in July, with production expanding at the fastest rate since March 2022. The S&P Global manufacturing purchasing managers’ index increased to 51.9 from 51.4 in June. An index reading above 50 signals expansion. The final figure was slightly below the preliminary estimate of 52.0. The data indicated a broader sector improvement, although demand remained weaker relative to the growth 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. Firms increased production even as new orders grew only marginally. Export orders declined again, affecting France, Spain, Italy, and Austria. Gains in other member states did not fully offset these losses. The gap between output and demand suggests manufacturers continued relying on orders placed in previous months.
Factories reduced their backlog of unfinished orders at the fastest pace since January, decreasing the amount of work in progress. This decline enabled companies to sustain higher production levels without a corresponding increase in new orders. During July, manufacturers also cut staffing levels once more. Business confidence improved to its strongest reading since February, though it remained below historical averages. Consequently, entering the third quarter, the sector showed increased output, fewer backlogs, and limited growth in new workloads.
Export demand continues to face pressure
Persistent weakness in international sales continued to slow the eurozone manufacturing recovery. New export orders declined across several major economies, with domestic demand providing only modest support. Overall, new business growth lagged behind production increases. Companies fulfilled current output needs by completing existing contracts and reducing outstanding work. The July figures showed a clear expansion in factory activity, but also underscored the ongoing gap between goods produced and new orders received.
Price pressures eased in July despite ongoing disruptions in global shipping channels. Input cost inflation slowed to its lowest point in five months. Manufacturers raised their selling prices at the slowest pace since March. Delivery times from suppliers remained extended but showed signs of easing compared to the previous five months. Elevated energy costs and transport disruptions linked to Middle East instability continued to impact supply chains, even as the rate of cost increases slowed.
Economic activity grows across the eurozone
The upturn in manufacturing coincided with a broader rise in private sector activity across the eurozone. The composite output index, which includes both manufacturing and services, reached 51.9 in July. This was its highest in five months and signaled ongoing expansion. Manufacturing contributed to this growth through increased production, though demand, exports, and employment figures within the sector remained subdued relative to the overall output number at the start of the quarter.
Eurostat reported that the eurozone’s gross domestic product increased by 0.4% in the second quarter compared to the previous three months. The economy had shown 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 indicated a strengthening economy, manufacturing continued to face weak demand, declining exports, and reduced staffing levels.