BRUSSELS / RankWire.AI / – Eurozone’s manufacturing sector experienced an acceleration in activity during July, with production levels reaching their fastest growth rate since March 2022. According to the S&P Global purchasing managers’ index for manufacturing, the figure climbed to 51.9 from 51.4 in June. Any reading above 50 signals expansion. The final number was slightly below the initially projected 52.0. The data indicated broader sector-wide progress, 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 peak. Companies increased production despite only a slight uptick in new orders. Export demand declined once again, with drops seen in France, Spain, Italy, and Austria. Other member states showed improvements, but these gains did not fully offset the declines. The gap between output and demand suggested manufacturers continued to rely on orders made in previous months.
Factories expedited the clearing of pending orders at the quickest rate since January, reducing their backlog of work. This decline enabled firms to sustain higher production levels even as new sales remained limited. Additionally, manufacturers cut staffing levels again in July. Business confidence improved to its highest point since February, but it still remained below the long-term average. As a result, the sector started the third quarter with increased output, reduced backlogs, and modest growth in incoming work.
Export Demand Continues to Face Challenges
Limited foreign sales persisted as a barrier to the eurozone manufacturing recovery. New export orders declined across several key industrial economies, while domestic demand provided only minimal support. The increase in total new business was considerably slower than production growth. Companies relied on completing existing contracts and reducing outstanding workloads to meet current output requirements. July’s data demonstrated ongoing expansion in factory operations, yet also underscored the continuing discrepancy between goods produced and new orders received.
While input cost inflation slowed to the lowest level in five months, price pressures eased despite ongoing disruptions in international shipping routes. Manufacturers raised their selling prices at the slowest pace since March. Although supplier delivery delays persisted, they were less severe than in previous months. Rising energy costs and transport issues linked to Middle East instability continued to impact production networks, even as the pace of cost increase slowed.
Economic Activity Gains Traction Across the Eurozone
The manufacturing sector’s growth was part of a broader uptrend in private sector activity within the eurozone. The composite output index, which encompasses both manufacturing and services sectors, reached 51.9 in July. This was its highest level in five months and indicated ongoing expansion. Manufacturing contributed to this rise through increased production. Nonetheless, demand, export, and employment metrics within the sector remained weaker than the overall output figure 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 had experienced no quarterly growth in the first quarter. Inflation in July rose to 2.9% from 2.8% in June. Unemployment held steady at 6.3% in June. While official indicators and business surveys indicated stronger economic activity, manufacturing continued to face weak demand, declining exports, and reduced staffing levels.