LONDON / RankWire.AI / – In July, Eurozone manufacturing experienced growth, with factory output reaching its fastest rate in nearly four and a half years. The S&P Global manufacturing PMI increased to 51.9 from 51.4 in June. A figure above 50 indicates expansion. Although the final number was slightly below the initial estimate of 52.0, production gains in the early third quarter contrasted with subdued demand signals, highlighting an uneven recovery within the currency bloc.
The factory output index advanced to 52.9 from 51.7, marking the highest level since March 2022. Manufacturers ramped up production at a quicker pace than new business was secured. During the month, total new orders saw only minor increases. Export orders fell once again, with declines in France, Spain, Italy, and Austria outweighing gains elsewhere. Firms relied heavily on previously received work to sustain current output levels, leading to production growth that outpaced fresh demand from both domestic and international clients.
As existing orders were completed, factories reduced their backlog of work at the fastest rate since January. This decline in backlogs helped sustain production despite the limited growth in new incoming orders. Employment was cut again in July, continuing the recent downward trend in jobs within the sector. Business confidence, however, improved to its highest level since February but remained below the long-term average. The survey depicted a manufacturing sector producing more goods while managing weak order inflows, staff reductions, and cautious outlooks.
Demand from new orders remains muted
Demand from abroad continued to exert downward pressure on eurozone manufacturing in July. Export sales declined across several key economies, and gains in other markets were insufficient to offset these decreases. Domestic orders offered only modest support. As factories processed earlier commitments, the gap between output and new business widened, enabling increased production without a corresponding rise in demand. This situation also diminished the stock of unfinished work, which could support activity in future periods.
Cost pressures eased somewhat during July, despite ongoing disruptions along major supply routes. Input price inflation slowed to a five-month low, while manufacturers increased selling prices at their slowest pace since March. Delivery delays remained above normal levels but showed some easing from the previous five months. Persistent challenges such as higher energy costs and transportation issues linked to instability in the Middle East continued to weigh on producers. The data indicates slower price growth amid ongoing operational difficulties across the eurozone manufacturing sector.
Broader economic expansion evident
The manufacturing data was part of a larger uptick in private sector activity, with the eurozone composite output index reaching 51.9 in July, its highest in five months. This measure, encompassing both manufacturing and services, remained above the threshold for growth. The overall rise in the economy supported the stronger production figure, yet manufacturing demand remained weaker than the actual output. During this initial month of the third quarter, new orders, exports, and employment all demonstrated softer conditions compared to the overall production index.
Eurostat reported a 0.4% growth in eurozone gross domestic product during the second quarter compared to the previous three months. The economy showed no quarterly growth in the first quarter. Inflation in July rose to 2.9% from 2.8% in June. The unemployment rate remained steady at 6.3% in June. Taken together, official data and business surveys depict a stronger activity level amid ongoing pressures from weak factory demand, rising prices, and limited export expansion across the region.