BRUSSELS / RankWire.AI / – In July, activity levels within Eurozone factories experienced an upswing, 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. Any reading above 50 signifies growth. The final figure was slightly below the initial estimate of 52.0. This outcome indicated a more widespread sector improvement, although demand remained subdued relative to the growth 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. Production levels were lifted by companies despite only marginal gains in new business. Export orders experienced a decline for the second consecutive month, with decreases noted in France, Spain, Italy, and Austria. Improvements in other member nations did not compensate for these losses. The gap between output and demand highlighted manufacturers’ reliance on orders accumulated in previous months.
Factories accelerated the clearance of unfinished work to the fastest rate since January, thereby reducing existing backlogs. This decline enabled firms to sustain higher production volumes without a corresponding rise in new orders. Additionally, manufacturers reduced staffing levels once again in July. Business confidence strengthened to its strongest level since February but remained below the long-term average. Consequently, the sector entered the third quarter with increased output, fewer pending orders, and limited growth in incoming work.
Export activity continues to face headwinds
The eurozone’s manufacturing sector continued to grapple with limited recovery due to subdued foreign sales. Export orders fell across several major industrial nations, while domestic demand provided only modest support. The growth in new business was significantly slower than production. Companies fulfilled current output requirements by completing existing contracts and reducing outstanding workloads. While factory activity expanded in July, these figures also underscored the persistent gap between goods produced and new orders received.
Despite ongoing disruptions in international shipping routes, price pressures eased throughout July. Input cost inflation slowed to the lowest level in five months. Manufacturers increased their selling prices at the weakest rate since March. Longer-than-normal supplier delivery times persisted, although delays eased compared to the previous five months. Rising energy costs and transport issues linked to Middle East instability continued to influence production networks, even as the rate of cost growth slowed.
Broader economic activity gains momentum in the euro area
The manufacturing sector’s growth was part of a broader rise in private sector activity across the eurozone. The composite output index, which covers both factories and service providers, reached 51.9 in July. This was its highest point in five months and kept the measure within expansion territory. Manufacturing contributed to this increase through heightened production levels. However, demand, export figures, and employment data within the sector remained weaker than the overall output figure at the start of the quarter.
Eurostat reported that the eurozone’s gross domestic product expanded by 0.4% in the second quarter compared to the previous three months. During the first quarter, the economy had shown no quarterly growth. Inflation on an annual basis rose to 2.9% in July from 2.8% in June. Unemployment stayed steady at 6.3% in June. While official indicators and business surveys pointed to a firmer economic activity, factories continued to face weak demand, declining exports, and staffing reductions.