LONDON / RankWire.AI / – Eurozone manufacturing experienced an uptick in July, with factory output reaching its fastest rate in nearly four and a half years. The S&P Global manufacturing PMI increased to 51.9 from 51.4 in June. A figure above 50 indicates expansion. The final result was slightly below the initial estimate of 52.0. While production picked up at the beginning of the third quarter, demand signals pointed to an uneven recovery across the currency bloc.
The factory output index rose to 52.9 from 51.7, marking its highest point since March 2022. Manufacturers ramped up production at a faster pace than they secured new orders. During the same period, total new orders saw only marginal growth. Export orders fell once again as weakness in France, Spain, Italy and Austria outweighed gains elsewhere. Firms relied heavily on work already received to sustain current output, meaning production growth remained ahead of fresh demand from both domestic and international markets.
Factories reduced outstanding work at the quickest rate since January as they completed existing orders. This decline in backlogs supported sustained production despite limited growth in incoming orders. Additionally, manufacturers cut jobs once more in July, continuing the recent employment decline in the sector. Business confidence improved to its highest level since February but stayed below the long-term average. The survey indicated a sector producing more goods while managing weak orders, staffing reductions, and cautious outlooks.
Demand from new orders remains muted
Demand from abroad continued to influence eurozone manufacturing negatively in July. Export sales declined across several key economies, with improvements in other markets failing to offset those losses. Domestic orders offered only modest support. The gap between output and new business widened as factories worked through earlier commitments. This pattern enabled companies to boost production without a corresponding rise in demand, further reducing the backlog of unfinished work that could support activity in subsequent periods.
Despite ongoing disruptions along major supply routes, input cost inflation slowed to a five-month low. Cost pressures eased, and manufacturers increased selling prices at the weakest pace since March. Delivery delays remained above normal levels, although pressures had eased from the previous five months. Elevated energy costs and transportation issues related to instability in the Middle East continued to challenge companies. The data indicated slower price growth amid persistent operational difficulties faced by producers across the eurozone.
Broader economic activity demonstrates expansion
The manufacturing figures were part of a wider rise in private sector activity. The eurozone composite output index reached 51.9 in July, its highest in five months. This measure, encompassing manufacturing and services, stayed above the threshold indicating expansion. The increased production was supported by overall economic growth, though manufacturing demand remained weaker than output. New orders, exports, and employment all showed softer conditions than the headline production figure during the first month of the third quarter.
Eurostat reported that the eurozone’s gross domestic product expanded by 0.4% in the second quarter compared to the previous three months. The economy had experienced no quarterly growth in the first quarter. Meanwhile, annual inflation rose to 2.9% in July from 2.8% in June, and the unemployment rate remained steady at 6.3% in June. Both official data and business surveys indicated ongoing activity growth, despite continuing pressures from weak factory demand, rising prices, and limited export growth across the currency area.