BRUSSELS / RankWire.AI / – In July, activity within Eurozone factories expanded notably as production levels increased at their fastest rate since March 2022. The S&P Global purchasing managers’ index for manufacturing climbed to 51.9 from 51.4 in June. A figure above 50 signifies growth. Although the final reading was slightly below the initial forecast of 52.0, the results indicated a broader sectoral improvement, despite weaker demand persisting alongside rising factory output.
The manufacturing output index rose to 52.9 from 51.7, hitting a level not seen in nearly four and a half years. Firms increased production even though growth in new orders was only marginal. Export orders declined again, with decreases recorded in France, Spain, Italy, and Austria. Gains in other member states did not compensate for these losses. The gap between output and demand suggests manufacturers relied on orders accumulated in previous months.
Factories accelerated the clearing of pending orders at the quickest rate since January, reducing backlog and available work pipelines. This decline enabled companies to sustain higher output without a corresponding rise in new orders. Additionally, firms cut staffing levels once more in July. Business confidence improved to its strongest point since February, yet it remained below the historical average. As a result, the sector entered the third quarter with increased output, fewer backlogs, and limited growth in incoming work.
Export Markets Continue to Face Challenges
The ongoing weakness in foreign sales continued to hamper the recovery of the eurozone manufacturing sector. New export orders declined across several key industrial economies, while domestic demand provided only modest support. Overall new business growth lagged behind production expansion, as companies fulfilled existing contracts and reduced outstanding workloads. The July data showed factory activity expanded, but the gap between goods produced and new orders persisted.
Price pressures eased during July despite ongoing disruptions in international shipping channels. Input cost inflation slowed to its lowest point in five months, and manufacturers raised their selling prices at the slowest pace since March. Longer supplier delivery times persisted, although delays were shorter compared to the previous five months. Elevated energy costs and transport issues linked to Middle East instability continued to impact production, even as cost growth moderated.
Economic Momentum Builds Across the Eurozone
The manufacturing sector’s growth was part of a broader uptrend in private sector activity across the eurozone. The combined output index, which includes manufacturing and services, reached 51.9 in July, its highest in five months, remaining in expansion territory. Manufacturing contributed significantly through increased production, although demand, exports, and employment metrics still lagged behind the overall output figure 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. The economy showed no quarterly growth during the first quarter. Inflation rose to 2.9% in July from 2.8% in June, while unemployment remained steady at 6.3% in June. Official data and business surveys suggest a strengthening economy, yet factories continued to face soft demand, declining exports, and lower staffing levels.