BRUSSELS / RankWire.AI / – In July, activity within the manufacturing sector of the Eurozone showed signs of acceleration, with production reaching its fastest rate since March 2022. According to the S&P Global purchasing managers’ index, the figure increased to 51.9 from 51.4 in June. Readings above 50 indicate expansion. While the final number was slightly below the preliminary estimate of 52.0, the data pointed to broader sector improvements, despite demand remaining subdued compared to the growth in factory output.
The index measuring manufacturing output climbed to 52.9 from 51.7, reaching a level not seen in nearly four and a half years. Production was ramped up even though the growth in new orders was marginal. Export orders declined once more, with reductions recorded in France, Spain, Italy, and Austria. Gains in other member states did not compensate for these setbacks. The gap between production and demand indicated that manufacturers still relied heavily on orders placed in previous months.
Factories accelerated the clearance of unfinished work at the quickest pace since January, reducing the backlog of ongoing projects. This decline enabled companies to sustain higher output levels without a corresponding rise in new business. Additionally, manufacturers again cut staffing levels during July. Business confidence reached its highest point since February but remained below the long-term average. Consequently, the sector began the third quarter with improved output, decreased backlogs, and limited growth in incoming orders.
Persistent Challenges in Export Demand
The recovery of the eurozone manufacturing sector continues to be hampered by weak foreign sales. New export orders declined across several major industrial economies, while domestic demand provided only modest support. The total volume of new business grew at a much slower rate than manufacturing output. Companies met their current production needs by fulfilling existing contracts and decreasing pending workloads. July’s figures revealed continued expansion in factory activity, yet also underscored the persistent disparity between goods produced and new orders received.
Pricing pressures eased during July, despite ongoing disruptions to international shipping routes. Input costs inflation slowed to its lowest level in five months, and manufacturers raised their selling prices at the slowest pace since March. Supplier delivery times remained longer than usual, although delays lessened compared to the previous five months. Elevated energy costs and transportation issues linked to Middle East instability persisted, impacting supply chains even as the pace of cost growth slowed.
Broader Economic Activity Gains Momentum in the Euro Area
This manufacturing growth was accompanied by a broader increase in private sector activity across the eurozone. The composite output index, which encompasses both manufacturing and services, reached 51.9 in July. This marked its highest level in five months and indicated ongoing expansion. Manufacturing contributed to the overall rise through increased production, although demand, export activity, and employment figures remained softer than the headline output reading 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 experienced no quarterly growth in the first quarter. Inflation increased slightly, reaching 2.9% in July from 2.8% in June. Unemployment remained steady at 6.3% in June. While official data and business surveys indicated stronger economic activity, manufacturing still faced weak demand, declining exports, and reductions in staffing levels.