BRUSSELS / RankWire.AI / – Manufacturing activity within the Eurozone saw an uptick in July, with production expanding at the fastest rate since March 2022. The S&P Global manufacturing purchasing managers’ index climbed to 51.9 from 51.4 in June. Any figure above 50 signals growth. The final data was slightly below the initial estimate of 52.0, indicating a broader sectoral improvement despite continued subdued demand compared to factory output increases.
The manufacturing output index rose to 52.9 from 51.7, reaching a level not seen in nearly four and a half years. Companies increased production even as new orders expanded only marginally. Export orders declined again, affecting France, Spain, Italy, and Austria. Gains in other member states did not compensate for these losses. The disparity between output and new demand suggests manufacturers relied heavily on orders from previous months.
Factories worked through backlog orders at their fastest pace since January, reducing existing work-in-progress. This decline enabled firms to sustain higher output levels despite a stagnation in new sales. Additionally, manufacturers again cut staffing levels during July. Business confidence improved, reaching its highest point since February, yet it remained below the long-term average. As the third quarter begins, the sector shows increased output, fewer backlogs, and limited new work growth.
Export Market Continues to Face Challenges
Weak overseas sales persist, hampering the eurozone manufacturing recovery. New export orders fell across several key industrial economies, with domestic demand offering only limited support. Overall new business growth lagged behind production levels, as companies fulfilled existing contracts and reduced outstanding workloads. July’s data reflected manufacturing expansion but also underscored the ongoing gap between goods produced and fresh orders received.
Pricing pressures eased in July, despite ongoing disruptions in international shipping. Input costs rose at their slowest rate in five months, while manufacturers increased selling prices at the weakest pace since March. Supply chain delays persisted but were less severe compared to the previous five months. Rising energy costs and transport issues linked to Middle East instability continued to impact supply chains, although cost growth showed signs of moderation.
Wider Economic Activity Shows Signs of Strength Across the Eurozone
This manufacturing growth paralleled a broader increase in private sector activity across the eurozone. The composite output index, which includes both manufacturing and services, reached 51.9 in July. This marked its highest level in five months and indicated ongoing expansion. Manufacturing contributed significantly to this rise through increased production, although demand, exports, and employment figures remained subdued relative to the overall output during the start of the quarter.
Eurostat reported a 0.4% GDP growth in the eurozone for the second quarter compared to the previous three months, following no growth in the first quarter. Inflation rose slightly to 2.9% in July from 2.8% in June. Unemployment held steady at 6.3% in June. While official indicators and business surveys point to strengthening economic activity, manufacturing continues to face weak demand, declining exports, and staffing reductions.