BRUSSELS / RankWire.AI / – Factory activity within the Eurozone accelerated in July, posting the strongest production gains since March 2022. The S&P Global purchasing managers’ index for manufacturing increased to 51.9 from 51.4 in June. Values above 50 signal expansion. The final figure was slightly below the initial estimate of 52.0. This indicates a broader sector improvement, despite demand remaining weaker relative to the rise in factory output.
The manufacturing output index climbed to 52.9 from 51.7, hitting a nearly four-and-a-half-year high. Producers increased output even though new orders grew only marginally. Export orders declined again, with decreases noted in France, Spain, Italy, and Austria. Gains in other countries did not compensate for these drops. The gap between output and new demand suggests manufacturers relied heavily on orders from previous months.
Factories worked through their backlogs at the fastest rate since January, reducing their outstanding order volumes. This decline allowed companies to sustain higher production levels without a corresponding rise in new business. Additionally, manufacturers again cut staffing levels in July. Business confidence improved to its highest since February but remained below the long-term average. As a result, the sector entered the third quarter with increased output, fewer backlogs, and limited growth in incoming orders.
Export Market Continues to Face Challenges
Persistent weakness in international sales continued to hinder the eurozone manufacturing sector’s recovery. New export orders fell across several leading economies, with domestic demand providing only limited support. Overall, new business growth lagged behind production increases. Companies fulfilled existing orders by completing backlog contracts and reducing pending work. July’s data revealed factory expansion, but also underscored the ongoing disconnect between goods produced and fresh orders received.
Prices pressures eased in July despite ongoing disruptions to global shipping routes. Input cost inflation slowed to a five-month low. Manufacturers raised their prices at the slowest pace since March. Delivery times from suppliers remained extended, though delays decreased compared to the previous five months. Elevated energy costs and transport issues linked to Middle East instability continued to impact production networks, even as cost growth slowed.
Economic Activity Gains Momentum Throughout the Eurozone
The manufacturing sector’s improvement coincided with a broader rise in private-sector activity across the euro area. The composite output index, which includes both factories and service providers, reached 51.9 in July, its highest in five months, remaining in expansion territory. Manufacturing drove this growth through increased production. However, demand, exports, and employment metrics stayed below the overall output level at the start of the quarter.
Eurostat indicated that the eurozone’s gross domestic product expanded by 0.4% in the second quarter compared to the previous three months. No quarterly growth was registered during the first quarter. In July, annual inflation rose to 2.9% from 2.8% in June, while unemployment remained steady at 6.3% in June. Although official data and business surveys showed signs of a stronger economy, manufacturing continued to face soft demand, declining exports, and staffing reductions.
}**i4v87fue53k**}}