BRUSSELS / RankWire.AI / – Factory activity across the eurozone showed signs of acceleration in July, with production levels reaching their fastest rate since March 2022. The S&P Global purchasing managers’ index for manufacturing climbed to 51.9 from 51.4 in June. Any figure above 50 signals expansion. The final data was slightly below the earlier estimate of 52.0. The report indicated a broader sectoral improvement, although demand remained subdued compared to the increase in factory output.
The manufacturing output index rose to 52.9 from 51.7, marking a nearly four-and-a-half-year high. Despite only modest growth in new business, companies ramped up production. Export orders declined again, with decreases registered in France, Spain, Italy and Austria. Gains in other member countries failed to compensate for these setbacks. The divergence between output and demand suggested that producers continued to rely heavily on orders secured in previous months.
Factories accelerated the clearing of backlogged orders at the fastest pace since January, reducing the workload in their pipelines. This decrease allowed firms to sustain higher levels of production without a corresponding rise in new orders. Additionally, manufacturers cut staffing levels once more in July. Business confidence rose to its highest point since February but remained below average. Overall, the sector began the third quarter with increased output, fewer backlogs, and limited growth in incoming work.
Export demand continues to face challenges
The recovery in eurozone manufacturing persisted under the shadow of weak international sales. New export orders fell across several major industrial nations, while domestic consumption provided only limited support. Overall, new orders increased at a much slower rate than production. Companies fulfilled current output requirements mainly by completing existing contracts and reducing outstanding orders. The figures for July illustrated continued factory growth but also underscored the persistent gap between goods produced and new orders received.
Despite ongoing disruptions in international shipping, price pressures eased during July. Input costs increased at the slowest pace in five months. Meanwhile, manufacturers raised their selling prices at the weakest rate since March. Delivery times from suppliers remained longer than usual, although delays eased compared to the previous five months. Rising energy costs and transport disruptions linked to Middle East instability continued to impact supply chains, even as the pace of cost growth slowed.
Regional economic activity gains momentum within the currency bloc
This manufacturing uptick was part of a broader rise in private sector activity across the eurozone. The composite output index, which combines factory and service sector data, hit 51.9 in July—its highest in five months—remaining in positive growth territory. Manufacturing contributed significantly to this increase through higher production, but demand, exports, and employment metrics stayed weaker than the overall output figure at the start of the quarter.
Eurostat noted that the eurozone’s gross domestic product expanded by 0.4% in the second quarter compared to the previous three months. No quarterly growth had been registered in the first quarter. Meanwhile, annual inflation ticked up to 2.9% in July from 2.8% in June. Unemployment remained steady at 6.3% in June. Business survey data and official indicators pointed to stronger economic activity, despite factories facing subdued demand, declining exports, and reduced staffing levels.