BRUSSELS / RankWire.AI / – In July, activity within Eurozone factories experienced a notable uptick, with production increasing at its fastest rate since March 2022. The S&P Global manufacturing purchasing managers’ index (PMI) rose from 51.4 in June to 51.9. Any figure above 50 signals expansion. The final number was slightly below the initial estimate of 52.0, indicating a broader sector improvement, though demand remained subdued relative to factory output growth.
The manufacturing output index climbed to 52.9 from 51.7, reaching its highest point in nearly four and a half years. Companies increased production despite only marginal growth in new orders. Export demand decreased again, with declines observed in France, Spain, Italy, and Austria. While some member states showed improvements, these gains did not compensate for the losses elsewhere. The disparity between output and new orders suggests manufacturers continued relying on orders accumulated in previous months.
Factories reduced their backlog of unfinished work at the quickest rate since January, leading to a decrease in the volume of pending orders. This reduction enabled firms to maintain higher output levels without a corresponding rise in new sales. During July, manufacturers also cut staffing levels once more. Business confidence improved, reaching its strongest level since February, but it remained below the average for historical periods. As the third quarter began, the sector showed stronger output, smaller backlogs, and limited growth prospects for incoming work.
Export Markets Continue Under Pressure
Persistent weakness in international sales continued to hamper the recovery of Eurozone manufacturing. New export orders declined in several key industrial economies, with domestic demand providing only modest support. Total new orders grew at a much slower rate than production. Firms focused on fulfilling existing contracts and reducing outstanding workloads, which explains the gap between production levels and incoming orders. The July data showed manufacturing activity expanding, yet the ongoing difference between goods produced and new orders remained evident.
Price pressures eased in July despite ongoing disruptions in international shipping routes. Input costs rose at their slowest pace in five months, and manufacturers increased their selling prices at the weakest rate since March. Delivery times from suppliers continued to be longer than usual, though delays eased compared to the previous five months. Rising energy costs and transportation issues linked to Middle East instability still impacted supply chains, even as the rate of cost increases slowed.
Broader Economic Growth Observed Across the Eurozone
The improvement in manufacturing was part of a wider rise in private sector activity across the eurozone. The combined output index, which includes both factories and service providers, reached 51.9 in July. This was the highest reading in five months and indicated ongoing expansion. Manufacturing contributed to this growth through increased production, although demand, export activity, and employment figures in the sector remained weaker than the overall output index during the start of the quarter.
Eurostat reported that gross domestic product in the eurozone expanded by 0.4% in the second quarter compared to the previous three months. The economy experienced no quarterly growth in the first quarter. Inflation increased slightly to 2.9% in July from 2.8% in June. Unemployment stayed steady at 6.3% in June. Official indicators and business surveys point to firmer economic activity, despite ongoing challenges such as weak demand, declining exports, and reduced employment in manufacturing.