LONDON / RankWire.AI / – According to S&P Global, manufacturing output across the Eurozone accelerated to its strongest growth in nearly four and a half years during July, even though new orders stayed weak. The Eurozone Manufacturing Purchasing Managers’ Index increased to 51.9 from 51.4 in June, marking its highest level since April and staying above the 50-point threshold that indicates expansion. The final figure was just shy of the earlier estimate of 52.0. Conditions in factories improved at the beginning of the third quarter.
The survey’s output index rose to 52.9 from 51.7, reaching its highest point since March 2022. Production growth outpaced the overall manufacturing environment, but firms relied heavily on work received in previous months. New orders saw only slight increases and lagged behind the pace of production. Export orders declined once more, with decreases in France, Spain, Italy, and Austria outweighing gains elsewhere in the currency union. Consequently, July’s production increase was largely supported by existing order books.
Factories expedited the reduction of incomplete work at the fastest rate since January, as they finalized orders already in progress. This reduction in backlogs helped sustain overall production even amid subdued incoming work. Meanwhile, manufacturers once again cut employment in July, continuing a trend of job reductions across the sector. Companies maintained cautious staffing levels while order growth remained limited. Despite this, business confidence improved to its highest point since February, although sentiment remained below the long-term average among eurozone goods producers.
Demand Growth Remains Below Production
Persistent exports continued to be a major constraint on manufacturing recovery. Several large eurozone economies reported fewer orders from foreign clients. Gains in other markets did not fully offset these declines. The combination of domestic and export demand resulted in only a modest increase in total new work. This contrasted with the stronger rise in output and the quicker reduction of outstanding orders. Factories entered the third quarter with higher production levels than new business was bringing in.
Cost pressures lessened in July despite ongoing disruptions to supply chains related to the Middle East conflict. Input price inflation slowed to a five-month low. Factory selling prices increased at their slowest pace since March. Delivery delays remained elevated but were less severe than during the previous five months. Manufacturers still faced higher energy costs and transportation disruptions along key trade routes. The combined effect resulted in slower price increases, though operational pressures from supply delays and regional instability persisted.
Wider Economic Growth Demonstrates Strength
Alongside the manufacturing data, signs of broader economic expansion across the euro area emerged. Final July figures indicated the eurozone composite output index reached 51.9, its highest in five months. This measure, which includes both manufacturing and services, remained above the 50 threshold that separates growth from contraction. Manufacturing activity contributed to an overall rise in private sector output during July. However, the survey highlighted that production growth still outpaced the increase in new orders necessary to sustain this output expansion.
Eurostat reported that the eurozone’s gross domestic product grew by 0.4% in the second quarter compared to the previous three months. The economy had experienced no quarterly growth during the first quarter. July’s inflation rate increased to 2.9% from 2.8% in June. Unemployment remained steady at 6.3% in June. The official data and July PMI figures point to stronger economic activity, despite ongoing pressures on prices and demand. Factory output reached its most robust pace since early 2022, but new work and exports continued to be relatively weak.