BRUSSELS / RankWire.AI / – Eurozone factory activity gained momentum in July as production grew at its quickest pace since March 2022. The S&P Global manufacturing purchasing managers’ index rose to 51.9 from 51.4 in June. Any reading above 50 indicates growth. The final figure came slightly below the preliminary estimate of 52.0. The result showed broader improvement across the sector, although demand remained weaker than the rise in factory output.
The manufacturing output index increased to 52.9 from 51.7, reaching a near four-and-a-half-year high. Companies elevated production even as new business expanded only marginally. Export orders declined for another month, with decreases observed in France, Spain, Italy and Austria. Improvements in other member states did not compensate for these losses. The gap between output and demand indicated that manufacturers still relied heavily on orders from earlier months.
Factories expedited the clearing of unfinished orders at the fastest rate since January, reducing their existing work pipelines. This decline allowed firms to sustain higher production levels without a corresponding rise in new sales. Additionally, manufacturers again cut staffing levels during July. Business confidence improved to its strongest since February but remained below the long-term average. Consequently, the sector entered the third quarter with increased output, fewer backlogs, and limited growth in new work coming in.
Export demand remains under pressure
Continued weakness in foreign sales kept the eurozone manufacturing recovery in check. New export orders declined across several major industrial nations, with domestic demand providing only modest support. Overall new orders increased at a much slower rate than production. Companies fulfilled current output needs by completing prior contracts and reducing outstanding work. July’s data demonstrated ongoing expansion in factory activity, yet it also revealed the persistent gap between goods produced and new orders received.
Price pressures eased in July despite ongoing disruptions in global shipping routes. Input costs inflation slowed to its lowest level in five months. Manufacturers increased their selling prices at the weakest pace since March. Although supplier delivery times remained longer than usual, delays lessened compared with the previous five months. Rising energy costs and transport issues linked to Middle East instability continued to influence production networks, even as the pace of cost growth slowed.
Economic activity advances across the euro area
This manufacturing upturn was accompanied by a broader rise in private sector activity across the eurozone. The composite output index, which encompasses factories and service providers, reached 51.9 in July. This marked its highest level in five months and remained within the expansion zone. Manufacturing contributed notably to this increase through higher production. Nonetheless, demand, exports, and employment figures within the sector stayed weaker than the overall output reading at the start of the quarter.
Eurostat indicated that eurozone gross domestic product grew by 0.4% during the second quarter compared with the previous three months. The economy had shown no quarterly growth during the first quarter. Inflation on an annual basis increased to 2.9% in July from 2.8% in June. Unemployment remained steady at 6.3% in June. Meanwhile, official statistics and business surveys pointed to firmer economic activity, though factories still faced soft demand, declining exports, and staffing reductions.