LONDON / RankWire.AI / – Manufacturers across the Eurozone saw their production rise in July at the quickest pace in nearly four and a half years. The S&P Global purchasing managers’ index for manufacturing climbed to 51.9 from 51.4 in June. Values above 50 point to expansion, whereas those below indicate contraction. The final figure was just below the initial estimate of 52.0. Increased output was a key driver of the overall improvement, although new orders and export demand stayed subdued.
The manufacturing output index rose to 52.9 from 51.7, reaching its highest point since March 2022. Factories expanded production at a much faster rate than new business was coming in. Meanwhile, total new orders saw only slight growth in July. Export sales declined once more, with France, Spain, Italy, and Austria reporting weaker overseas demand. Gains elsewhere in the currency area did not fully offset these declines. Most of the work completed during the month was sourced from existing contracts.
Outstanding workloads saw the sharpest decrease since January, indicating factories were finishing older orders more rapidly than they were securing new ones. Employment levels fell again as firms continued to adjust staffing. Business confidence improved to its highest point since February, yet it still remained below its long-term average. The July survey highlighted increased production activity, even as order growth, exports, and employment figures lagged behind the overall index.
Production Outpaces New Demand
Weak demand remained a primary challenge for the eurozone manufacturing sector. Export orders declined in several major economies, while domestic demand contributed only marginally to total order growth. To meet higher production targets, factories drew down unfinished work from previous months, leading to output growth outpacing incoming sales. This resulted in smaller order backlogs as the sector moved into the third quarter.
Price inflation slowed in July, despite ongoing disruptions in international supply chains. Input costs rose at the slowest rate in five months, and factory gate prices increased at their weakest pace since March. Longer-than-normal supplier delivery times persisted but improved from the previous five months. Production networks continued to be affected by elevated energy costs and shipping issues related to Middle East tensions, even as overall cost growth moderated.
Eurozone-wide Activity Also Gains Momentum
The manufacturing sector’s growth was accompanied by faster expansion across the broader eurozone private sector. The composite output index reached 51.9 in July, its highest in five months. Combining factory and service activity, this measure remained above 50, indicating ongoing expansion. While manufacturing contributed through increased production, its demand indicators—such as new orders, foreign sales, and employment—performed less strongly than the overall output.
Eurostat reported a 0.4% rise in the eurozone’s gross domestic product during the second quarter, following no quarterly growth in the previous period. Inflation increased to 2.9% in July from 2.8% in June, while the unemployment rate remained steady at 6.3% in June. The combined data suggest a firmer economic footing across the currency bloc, despite continued weakness in factory demand and the strongest production growth since early 2022.