LONDON / RankWire.AI / – Manufacturers within the Eurozone saw their output grow at the quickest pace in nearly four and a half years during July. The S&P Global manufacturing purchasing managers’ index increased to 51.9 from 51.4 in June. An index reading above 50 indicates expansion, whereas below 50 signals contraction. The final figure was just shy of the preliminary estimate of 52.0. While stronger production contributed to the overall increase, new orders and export demand remained subdued.
The manufacturing output index climbed to 52.9 from 51.7, marking its highest level since March 2022. Factories boosted their production at a significantly faster rate than new business was coming in. During July, total orders only grew marginally. Export sales fell once again, with France, Spain, Italy, and Austria reporting weaker overseas demand. Gains in other parts of the currency bloc were not enough to offset these declines. Much of the work completed during the month came from existing contracts.
Outstanding workloads decreased sharply—at the fastest rate since January. This decline indicated that factories were completing previous orders more quickly than they were securing new ones. Employment levels declined again as manufacturers continued to adjust their staffing. Business confidence improved, reaching its highest point since February. Nonetheless, the index remained below its long-term average. The July survey highlighted increased activity on production lines, but order growth, exports, and employment still lagged behind the overall index.
Production Outpaces New Orders, Leading to Reduced Backlogs
Weak demand conditions continued to be the main challenge facing the eurozone manufacturing sector. New export orders declined across several major manufacturing economies. Domestic demand provided limited support, resulting in only a slight rise in total orders. Manufacturers met higher output targets primarily by drawing down unfinished work from previous months. As a result, production growth outstripped incoming sales. The gap between these indicators remained evident as the sector entered the third quarter with smaller order backlogs.
Price growth slowed during July, though disruptions across global supply routes persisted. Input cost inflation eased to a five-month low. Factory gate prices increased at their slowest rate since March. Longer-than-normal supplier delivery times persisted but showed some improvement over the previous five months. Rising energy costs and shipping issues linked to Middle East instability continued to impact production networks. These pressures remained even as the overall rate of cost increases moderated.
Broader Eurozone Economic Activity Also Shows Signs of Growth
The positive trend in manufacturing coincided with faster expansion across the broader eurozone private sector. The composite output index reached 51.9 in July, its highest level in five months. This indicator combines activity in factories and service providers. It stayed above the 50 threshold, signaling ongoing monthly growth. While manufacturing contributed through increased production, its demand indicators remained weaker. New orders, export sales, and employment all underperformed relative to the overall activity measure.
Eurostat reported a 0.4% rise in eurozone gross domestic product during the second quarter. The figures covered the previous three months, when the economy showed no quarterly growth. Inflation on an annual basis increased to 2.9% in July from 2.8% in June. The unemployment rate held steady at 6.3% in June. These combined data pointed to a stronger economic performance across the currency bloc, despite continued weakness in factory demand, even as the highest production growth since early 2022 was recorded.
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