BRUSSELS / RankWire.AI / – In July, factory activity across the Eurozone experienced a notable upswing, with production expanding at its fastest rate since March 2022. The S&P Global manufacturing purchasing managers’ index increased to 51.9 from 51.4 in June. Any reading above 50 signals growth. The final number was slightly below the preliminary estimate of 52.0. While this showed broader sector improvement, demand remained subdued relative to the increase in factory output.
The manufacturing output index rose to 52.9 from 51.7, reaching a level not seen in nearly four and a half years. Companies raised production despite only marginal growth in new business. Export orders declined again for a month, with decreases noted in France, Spain, Italy, and Austria. Gains in other member states did not compensate for these losses. The gap between output and demand indicated manufacturers relied heavily on orders placed in previous months.
Factories expedited the clearing of backlogged orders at the fastest pace since January, reducing the amount of work in progress. This decline allowed firms to sustain higher production levels without a corresponding rise in new orders. Staffing levels decreased once more in July. Business confidence reached its highest since February but remained below historical averages. Consequently, the sector entered the third quarter with increased output, fewer backlogs, and limited growth in new work.
Export Market Continues to Struggle
The eurozone’s manufacturing recovery remained constrained by weak international sales. New export orders declined in several key industrial economies, while domestic demand provided only modest support. Total new business increased at a much slower rate than production, with companies fulfilling existing contracts and reducing outstanding workloads to meet current output levels. July’s data indicated continued factory expansion, yet the persistent gap between goods produced and new orders underscored ongoing challenges.
Despite ongoing international shipping disruptions, price pressures eased in July. Input costs rose at the slowest pace in five months, and manufacturers increased their selling prices at the weakest rate since March. Delivery times from suppliers remained longer than usual, though delays improved compared to the previous five months. Elevated energy costs and transport disruptions linked to Middle East instability continued to influence production networks, even as cost growth slowed.
Broader Economic Activity Strengthens in the Eurozone
The uptick in manufacturing was part of a wider increase in private sector activity across the eurozone. The composite output index, which encompasses manufacturing and services, reached 51.9 in July—its highest in five months—signaling ongoing expansion. Manufacturing contributed to this growth through higher production levels, though demand, export activity, and employment metrics remained weaker than the overall output figure at the start of the quarter.
Eurostat reported that gross domestic product in the eurozone grew by 0.4% in the second quarter compared to the previous three months, following no quarterly growth in the first quarter. Inflation rose to 2.9% in July from 2.8% in June, while unemployment stayed steady at 6.3% in June. Business survey and official data indicated stronger economic activity, yet factories continued to face subdued demand, declining exports, and lower staffing levels.