LONDON / RankWire.AI / – In July, manufacturing output across the Eurozone expanded at its quickest pace in nearly four and a half years. The S&P Global purchasing managers’ index for manufacturing rose to 51.9 from 51.4 in June. Values above 50 signal growth, whereas those below indicate contraction. The final figure was just below the initial estimate of 52.0. Although increased production drove the overall improvement, new orders and export demand continued to be weak.
The manufacturing output index increased to 52.9 from 51.7, reaching its highest point since March 2022. Factories expanded their output at a faster rate than new orders arrived. Meanwhile, total order volumes saw only slight growth in July. Export sales declined again, with weaker overseas demand reported in France, Spain, Italy, and Austria. Gains elsewhere within the currency zone could not compensate for these declines. Most of the work completed during the month came from existing contracts rather than new business.
Outstanding workloads decreased at the sharpest rate since January, indicating factories were finishing previous orders more quickly than new ones were being secured. Employment levels fell again as companies continued to adjust staffing. Nevertheless, business confidence improved, reaching its highest level since February, although it remained below the long-term average. The July survey highlighted increased activity on production lines, yet order growth, exports, and employment still lagged behind the headline index.
Production Outpaces New Demand
Weakness in demand remained a key challenge for the eurozone manufacturing sector. New export orders declined across several leading manufacturing countries. Domestic demand provided limited support, resulting in only a marginal increase in total orders. To meet higher production targets, firms relied heavily on drawing down unfinished work from previous months. As a result, output growth surpassed incoming sales, creating a noticeable gap. This trend persisted as the sector moved into the third quarter, with smaller order backlogs.
In July, price growth slowed, although disruptions in global supply chains persisted. Input cost inflation decreased to a five-month low, and factory gate prices rose at their slowest pace since March. Supplier delivery times remained longer than usual but improved over the past five months. Ongoing energy costs and shipping issues related to Middle East instability continued to impact production networks. Despite the moderation in overall cost increases, these pressures still affected the sector.
Broader Eurozone Economic Activity Also Shows Growth
The uptick in manufacturing was accompanied by faster growth in the broader eurozone private sector. The composite output index reached 51.9 in July, marking its highest point in five months. This index combines activity levels across manufacturing and services sectors. Although it remained above 50, indicating expansion, manufacturing’s contribution was driven by increased production, while demand indicators such as new orders, foreign sales, and employment grew more weakly than the overall sector’s output measure.
Eurostat reported a 0.4% rise in eurozone gross domestic product for the second quarter. The figures compare with no quarterly growth in the previous three months. Meanwhile, annual inflation increased to 2.9% in July from 2.8% in June, and the unemployment rate stayed steady at 6.3% in June. These combined data points suggest a more resilient economic activity across the currency bloc, despite ongoing weakness in factory demand and export markets, even as manufacturing experienced its strongest production growth since early 2022.