BRUSSELS / RankWire.AI / – Eurozone factory activity gained momentum in July as production grew at its quickest pace since March 2022. The S&P Global manufacturing purchasing managers’ index rose to 51.9 from 51.4 in June. Any reading above 50 indicates growth. The final figure came slightly below the preliminary estimate of 52.0. The result showed broader improvement across the sector, although demand remained weaker than the rise in factory output.
The manufacturing output index increased to 52.9 from 51.7, reaching a near four-and-a-half-year high. Companies raised production even as new business expanded only marginally. Export orders fell for another month, with declines in France, Spain, Italy and Austria. Improvements in other member states did not offset those losses. The difference between output and demand showed that manufacturers continued to depend on orders placed during earlier months.
Factories cleared unfinished orders at the fastest rate since January, reducing the work available in their existing pipelines. That decline helped companies maintain higher production without a similar increase in new sales. Manufacturers also reduced staffing levels again during July. Business confidence improved to its strongest reading since February, but it stayed below the historical average. The sector therefore entered the third quarter with stronger output, fewer backlogs and limited growth in incoming work.
Export demand remains under pressure
Weak foreign sales continued to restrict the eurozone manufacturing recovery. New export orders declined across several major industrial economies, while domestic demand offered only modest support. Total new business rose at a much slower pace than production. Companies met current output needs by completing previously secured contracts and reducing outstanding workloads. July’s figures showed clear expansion in factory operations, but they also highlighted the continued gap between goods produced and fresh orders received.
Price pressures eased during July despite persistent disruption across international shipping routes. Input cost inflation slowed to its lowest level in five months. Manufacturers increased their selling prices at the weakest pace since March. Supplier delivery times remained longer than normal, although delays eased compared with the previous five months. Higher energy expenses and transport problems linked to Middle East instability continued to affect production networks, even as the pace of cost growth moderated.
Economic activity strengthens across currency bloc
The manufacturing improvement accompanied a wider rise in private sector activity across the eurozone. The composite output index, which covers factories and service providers, reached 51.9 in July. That marked its highest level in five months and kept the measure in expansion territory. Manufacturing contributed to the increase through stronger production. However, the sector’s demand, exports and employment readings remained weaker than the headline output figure during the opening month of the quarter.
Eurostat reported that eurozone gross domestic product expanded 0.4% during the second quarter compared with the previous three months. The economy had shown no quarterly growth during the first quarter. Annual inflation increased to 2.9% in July from 2.8% in June. Unemployment remained at 6.3% in June. The official indicators and business survey data recorded firmer economic activity, while factories continued to face soft demand, declining exports and reduced staffing.