LONDON / RankWire.AI / – Eurozone manufacturers ramped up production in July at the quickest pace seen in nearly four and a half years. The S&P Global manufacturing purchasing managers’ index increased to 51.9 from 51.4 in June. Readings above 50 signify expansion, whereas those below indicate contraction. The final index was just under the preliminary estimate of 52.0. The overall rise was driven by stronger manufacturing output, though new orders and export demand stayed subdued.
The manufacturing output index climbed to 52.9 from 51.7, marking its highest level since March 2022. Factories expanded production at a significantly faster rate than new orders arrived. During July, total orders saw only slight growth. Export sales declined once again, with weaker overseas demand reported by France, Spain, Italy, and Austria. Gains in other parts of the euro area were not enough to offset these declines. Much of the work completed during the month was supplied by existing contracts.
Manufacturers reduced their outstanding workloads at the sharpest rate since January, indicating factories were completing prior orders more quickly than they could replace them. Employment figures fell once again, as companies continued to adjust their staffing levels. Business confidence improved to its highest point since February, yet it remained below its long-term average. The July survey reflected stronger activity on production lines, while order growth, exports, and employment continued to lag behind the headline index.
Production Surpasses New Orders
Weak demand remained the primary challenge in the eurozone manufacturing sector. New export orders declined across several leading manufacturing economies. Domestic demand provided limited support, resulting in only a modest rise in total orders. To meet higher production targets, companies drew down existing work-in-progress from previous months. This caused output growth to outpace incoming sales, leaving smaller order backlogs as the sector entered the third quarter.
Although price growth slowed in July, manufacturers still faced disruptions across global supply chains. Input costs inflation eased to a five-month low, and factory gate prices increased at their slowest rate since March. While supplier delivery times remained extended, they improved compared to the past five months. Elevated energy costs and shipping issues linked to Middle East instability continued to impact production networks. Despite these pressures, the overall rate of cost increases moderated, even as supply chain disruptions persisted.
Broader Eurozone Activity Also Gains Momentum
The rise in manufacturing activity coincided with faster growth across the eurozone’s wider private sector. The composite output index reached 51.9 in July, its highest level in five months. This figure combines activity from factories and service providers. It remained above the 50 mark, indicating another month of expansion. Manufacturing contributed through increased production, but demand indicators like new orders, export sales, and employment showed weaker performance compared to the overall output measure.
Eurostat reported a 0.4% increase in eurozone gross domestic product during the second quarter. This growth covered the previous three months, which saw no quarterly expansion. Inflation rose to 2.9% in July from 2.8% in June. The unemployment rate remained steady at 6.3% in June. These combined figures indicate a more robust economic activity across the currency bloc, despite ongoing weakness in factory demand, even as manufacturing output hit its strongest level since early 2022.