BRUSSELS / RankWire.AI / – Factory activity in the Eurozone picked up in July, with production increasing at its fastest rate since March 2022. The S&P Global manufacturing purchasing managers’ index climbed to 51.9 from 51.4 in June. Values above 50 signal growth. The final figure was slightly below the initial estimate of 52.0. This indicated a broader sector improvement, even though demand remained subdued relative to the rise in factory output.
The manufacturing output index moved up to 52.9 from 51.7, reaching a level not seen in nearly four and a half years. Despite only marginal growth in new orders, companies increased production. Export orders declined again for the month, with decreases noted in France, Spain, Italy and Austria. While other member states saw some improvements, these did not fully offset the losses. The difference between output and new demand suggests that manufacturers are still relying on orders placed in previous months.
Factories accelerated the clearing of backlogged orders at the quickest pace since January, reducing the amount of work in progress. This decline allowed companies to maintain higher levels of production without a corresponding increase 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. The sector entered the third quarter with stronger output, fewer backlogs, and limited growth in incoming orders.
Export activity continues to face headwinds
Persistent weakness in foreign sales kept the eurozone manufacturing recovery subdued. New export orders declined across several key industrial economies, with domestic demand providing only modest support. Overall new business expanded at a much slower rate than production. To meet current output levels, companies focused on completing existing contracts and reducing pending workloads. The July data showed growth in factory activity but also underscored the ongoing gap between goods produced and new orders received.
Price pressures eased during July, despite ongoing disruptions to international shipping routes. Input cost inflation slowed to its lowest point in five months. Manufacturers increased their selling prices at the slowest pace since March. Delivery times from suppliers remained longer than usual, although delays eased compared to the previous five months. Rising energy costs and transport issues related to Middle East instability continued to impact production networks, even as the rate of cost growth slowed.
Broader economic activity gains momentum within the eurozone
The manufacturing sector’s improvement was part of a wider uptick in private sector activity across the eurozone. The composite output index, which measures both manufacturing and services, reached 51.9 in July. This was the highest in five months and indicated ongoing expansion. Manufacturing contributed to this rise through increased production, but demand, export, and employment figures remained weaker than the overall output level at the start of the quarter.
Eurostat reported that eurozone gross domestic product grew by 0.4% in the second quarter compared to the previous three months. There was no quarterly growth during the first quarter. Inflation rate increased to 2.9% in July from 2.8% in June. Unemployment held steady at 6.3% in June. While official indicators and business surveys pointed to a strengthening economy, factories continued to face weak demand, declining exports, and reduced staffing levels.