LONDON / RankWire.AI / – In July, manufacturing output across the Eurozone accelerated at a pace not seen in nearly four and a half years. The S&P Global manufacturing purchasing managers’ index increased to 51.9 from 51.4 in June. Values above 50 denote expansion, whereas those below indicate contraction. The final index came in slightly below the preliminary estimate of 52.0. The rise in production was primarily supported by increased activity, though demand for new orders and exports remained weak.
The index measuring manufacturing output climbed to 52.9 from 51.7, its highest level since March 2022. Factories boosted production at a significantly faster rate than new business was generated. During July, overall orders experienced only modest growth. Export sales decreased once more, with France, Spain, Italy, and Austria all reporting softer overseas demand. Gains elsewhere within the currency area failed to offset these declines. Much of the work completed during the month was driven by existing contracts rather than new business.
Outstanding workloads were reduced at the quickest pace since January, indicating that factories were clearing earlier orders faster than they acquired new ones. Employment figures declined again, as producers continued adjusting their staffing levels. Business confidence improved to its highest point since February, though it still remained below its long-term average. The July survey highlighted increased production activity, yet growth in orders, exports, and employment lagged behind the headline index, signaling ongoing challenges.
Production exceeds incoming orders
Weakness in demand persisted as the primary concern within the eurozone manufacturing sector. Several key economies reported declines in export orders. Domestic demand offered only limited support, leading to a marginal increase in total orders. To meet higher production targets, factories relied heavily on drawing down unfinished work from previous months, resulting in output growth surpassing new sales. This kept the order backlog smaller as the sector moved into the third quarter.
Price inflation slowed in July, even though disruptions in international supply chains persisted. Input costs rose at the slowest rate in five months, and factory gate prices increased at their weakest since March. Delivery times from suppliers remained extended but showed some improvement over the past five months. Rising energy prices and ongoing shipping disruptions related to Middle East instability continued to impact production networks. Despite a moderation in overall cost increases, these pressures remained present.
Eurozone-wide activity shows signs of expansion
The improvement in manufacturing was complemented by a faster pace of growth in the broader eurozone private sector. The composite output index reached 51.9 in July, marking its highest level in five months. This index combines activity across manufacturing and service sectors, both of which remain above the 50 mark, indicating continued monthly expansion. Manufacturing contributed significantly through increased production, but demand indicators such as new orders, exports, and employment remained weaker than the overall output measure.
Eurostat reported a 0.4% rise in eurozone gross domestic product during the second quarter. The figures cover the previous three months, during which the economy showed no quarterly growth. Meanwhile, annual inflation increased to 2.9% in July from 2.8% in June. The unemployment rate stayed steady at 6.3% in June. These combined data suggest a solidifying economic activity across the currency bloc, even as factory demand continues to lag, despite the strongest production growth since early 2022.