BRUSSELS / RankWire.AI / – In July, manufacturing activity across the eurozone experienced an upward trajectory, with production rates reaching their highest since March 2022. The S&P Global manufacturing purchasing managers’ index increased to 51.9 from 51.4 in June. Any figure above 50 signifies expansion. The final number was slightly below the earlier estimate of 52.0. This data indicates a broader sectoral improvement, even as demand continued to lag behind 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 was ramped up despite only marginal increases in new orders. Export demand declined once more, notably in France, Spain, Italy, and Austria. Although other member states showed improvements, these did not compensate for the losses elsewhere. The gap between output and new orders suggests manufacturers relied heavily on backlog orders accumulated in previous months.
Factories worked through unfinished orders at their fastest rate since January, reducing existing order backlogs. This decline allowed firms to sustain higher production levels without corresponding growth in new sales. Additionally, manufacturing firms decreased staffing levels once again in July. Business sentiment improved to its highest point since February, but it remained below the average of past years. As a result, the sector started the third quarter with increased output, fewer outstanding orders, and limited incoming work growth.
Export markets continue to face pressure
Persistent weakness in international sales continued to hinder the eurozone’s manufacturing recovery. New export orders fell across several key industrial economies, while domestic demand provided only slight support. The increase in total new business was much slower than production growth. Companies primarily met their current output needs by completing existing contracts and reducing pending workloads. July’s data demonstrated factory expansion, but also underscored the ongoing disparity between goods produced and new orders received.
Price pressures lessened in July despite ongoing disruptions in global shipping routes. Input costs grew at the slowest pace in five months. Firms raised their selling prices at the weakest rate since March. Delivery times from suppliers remained prolonged, although delays eased compared to the previous five months. Rising energy costs and transportation issues linked to Middle East instability continued to impact supply chains, even as the pace of cost increases slowed.
Economic activity sees expansion across the eurozone
The manufacturing sector’s growth coincided with a broader increase in private sector activity within the eurozone. The composite output index, which encompasses both manufacturing and services, reached 51.9 in July. This marked the highest reading in five months and indicated ongoing expansion. Manufacturing contributed significantly to this uptick through increased production. Nevertheless, demand, export figures, and employment metrics within the sector remained weaker than the overall output figure at the start of the quarter.
Eurostat reported a 0.4% growth in eurozone GDP during the second quarter relative to the previous three months. The economy showed no quarterly growth in the first quarter. Inflation for July climbed to 2.9% from 2.8% in June, while unemployment stayed steady at 6.3% in June. Business survey data and official indicators point to stronger economic activity overall, even as factory demand remained subdued, exports declined, and employment levels decreased.