BRUSSELS / RankWire.AI / – Factory activity across the Eurozone showed signs of acceleration in July, with production increasing at its fastest rate since March 2022. The S&P Global manufacturing purchasing managers’ index moved up to 51.9 from 51.4 in June. Readings above 50 indicate growth. The final figure was slightly below the initial estimate of 52.0. The data pointed to a broader sector improvement, though demand remained weaker compared to the rise in factory output.
The manufacturing output index grew to 52.9 from 51.7, reaching nearly a four-and-a-half-year high. Companies increased production despite only marginal growth in new business. Export orders declined again, with decreases noted in France, Spain, Italy, and Austria. Improvements in other countries did not offset these drops. The gap between output and demand suggests manufacturers still rely heavily on orders from previous months.
Factories worked through unfinished orders at the fastest pace since January, reducing the workload in their existing pipelines. This decline helped maintain higher production levels without a corresponding rise in new sales. During July, manufacturers also cut staffing again. Business confidence improved to its highest since February but remained below average. The sector entered the third quarter with stronger output, fewer backlogs, and limited growth in incoming orders.
Export demand remains under pressure
Weak foreign sales continued to hamper the eurozone manufacturing recovery. New export orders declined in several major economies. Domestic demand provided only modest support. Total new business grew much slower than production. Companies fulfilled current output needs by completing existing contracts and reducing outstanding orders. July’s data showed factory activity expanding, but the gap between goods produced and new orders remained clear.
Price pressures eased in July despite ongoing disruptions to international shipping. Input costs inflation slowed to its lowest level in five months. Manufacturers raised their selling prices at the slowest rate since March. Delivery times from suppliers remained longer than usual, though delays lessened compared to the previous five months. Rising energy costs and transport issues linked to Middle East instability continued to impact production. Yet, the pace of cost growth slowed.
Broad economic activity advances across the euro area
The manufacturing sector’s growth was part of a wider increase in private sector activity in the eurozone. The composite output index, which measures both factories and service providers, reached 51.9 in July. This was its highest in five months and indicated expansion. Manufacturing played a key role in this growth through increased production. However, demand, exports, and employment figures remained weaker than the overall output level at the start of the quarter.
Eurostat reported that the eurozone’s gross domestic product grew by 0.4% in the second quarter compared to the previous three months. There was no quarterly growth in the first quarter. Inflation rose to 2.9% in July from 2.8% in June. Unemployment stayed steady at 6.3% in June. Official data and business surveys pointed to stronger economic activity, but factories continued to face weak demand, declining exports, and reduced staffing levels.