LONDON / RankWire.AI / – Eurozone manufacturing experienced growth in July, with factory output hitting its fastest rate in nearly four and a half years. The S&P Global manufacturing PMI increased to 51.9 from 51.4 in June. A figure above 50 indicates expansion. The final reading was just below the initial estimate of 52.0. Production picked up at the start of the third quarter, but demand signals showed uneven recovery across the currency bloc.
The factory output index rose to 52.9 from 51.7, reaching its highest point since March 2022. Manufacturers boosted production more quickly than they gained new orders. During the month, new orders grew only slightly. Export orders fell again, with weakness in France, Spain, Italy, and Austria outweighing progress elsewhere. Companies relied on existing orders to keep output steady, resulting in production growth outpacing new domestic and international demand.
Factories reduced backlogs at the fastest rate since January by completing pending orders. This decline helped sustain production despite limited new business. July also saw further job cuts, continuing the recent employment decline in the sector. Business confidence improved to its strongest level since February but remained below the long-term average. The survey indicated a sector producing more goods while managing weak orders, staffing reductions, and cautious outlooks.
Demand from new orders remains weak
Foreign demand continued to weigh on eurozone manufacturing in July. The export sales declined across several key economies. Meanwhile, gains in other markets were not enough to offset those losses. Domestic orders offered only modest support. The gap between output and new orders widened as factories worked through earlier commitments. This pattern allowed companies to increase production without a corresponding rise in demand. It also decreased the amount of unfinished work, affecting activity in future periods.
Cost pressures eased in July despite ongoing disruptions along major supply routes. Input price inflation slowed to a five-month low. Manufacturers raised prices at the slowest pace since March. Delivery delays remained above normal but eased from the previous five months. Companies faced higher energy costs and transportation issues linked to instability in the Middle East. The data suggests slower price growth amid continued operational challenges for producers throughout the eurozone.
The wider economy shows signs of expansion
The factory data reflected broader growth in the private sector. The eurozone composite output index reached 51.9 in July, its highest in five months. This measure combines manufacturing and services and stayed above the expansion threshold. Overall economic growth supported the higher production figures. However, manufacturing demand remained weaker than output. New orders, exports, and employment all showed softer conditions compared to the headline production number at the start of the third quarter.
Eurostat reported that eurozone GDP increased by 0.4% in the second quarter compared to the previous three months. The economy had no quarterly growth in the first quarter. Inflation rose to 2.9% in July from 2.8% in June. The unemployment rate stayed at 6.3% in June. These official figures and business surveys depict a growing economy facing ongoing challenges like weak factory demand, rising prices, and limited export growth across the currency area.