BRUSSELS / RankWire.AI / – The S&P Global manufacturing purchasing managers’ index increased to 51.9 in July from 51.4 in June, indicating an acceleration in factory activity across the eurozone. Any score above 50 signifies growth. The final figure was slightly below the initial estimate of 52.0. This suggests a broader positive trend within the manufacturing sector, although demand growth remained subdued compared to the rise in factory output.
Manufacturing output climbed to 52.9 from 51.7, reaching nearly a four-and-a-half-year high. Firms boosted production despite only slight increases in new orders. Export orders declined once again, with decreases observed in France, Spain, Italy, and Austria. Meanwhile, improvements in other countries did not fully offset these declines. The gap between production and demand indicates that manufacturers continued to rely on orders placed in previous months.
Factories expedited the clearing of unfinished work at the fastest rate since January, reducing their existing backlogs. This decline allowed companies to sustain higher levels of output without a corresponding rise in new orders. Additionally, manufacturers reduced their staffing levels again in July. Business confidence improved, reaching its highest point since February, but still remained below the long-term average. Consequently, the sector entered the third quarter with increased output, fewer backlogs, and limited growth prospects for incoming work.
Export demand remains under pressure
The eurozone manufacturing recovery continues to face headwinds from weak foreign sales. New export orders declined across multiple key industrial economies, while domestic demand provided only modest support. The growth in new business was substantially slower than production levels. Companies fulfilled existing orders by completing contracts secured earlier and cutting down on backlogs. The July data revealed ongoing expansion in factory activity, but also underscored the persistent gap between goods produced and new orders received.
Price pressures showed signs of easing in July, despite ongoing disruptions in international shipping routes. Inflation of input costs slowed to its lowest point in five months. Manufacturers raised their selling prices at the slowest rate since March. While supplier delivery times remained longer than usual, delays had eased compared to the previous five months. Elevated energy costs and transport issues linked to Middle East instability continued to impact production chains, even as the pace of cost increases slowed.
Economic activity gains momentum across the eurozone
The uptick in manufacturing coincided with broader growth in private sector activity across the eurozone. The composite output index, which measures both manufacturing and service sectors, reached 51.9 in July, its highest in five months and indicating ongoing expansion. Manufacturing contributed to this rise through increased production. However, readings for demand, exports, and employment 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 with the previous three months. The economy experienced no quarterly growth during the first quarter. Inflation increased slightly to 2.9% in July from 2.8% in June. Unemployment held steady at 6.3% in June. While official indicators and business surveys pointed to a strengthening economy, manufacturing continued to face weak demand, declining exports, and reduced staffing levels.