LONDON / RankWire.AI / – Eurozone manufacturers increased production in July at the fastest rate in nearly four and a half years. The S&P Global manufacturing purchasing managers’ index rose to 51.9 from 51.4 in June. Readings above 50 indicate growth, while figures below that level signal contraction. The final index stood just under the preliminary estimate of 52.0. Stronger production supported the overall gain, but new orders and export demand remained subdued.
The manufacturing output index advanced to 52.9 from 51.7, reaching its highest point since March 2022. Factories raised output at a much quicker rate than new business arrived. Total orders increased only slightly during July. Export sales declined again, with France, Spain, Italy and Austria reporting weaker overseas demand. Gains in other parts of the currency area failed to offset those losses. Existing contracts supplied much of the work completed during the month.
Manufacturers reduced their outstanding workloads at the sharpest pace since January. That reduction showed factories were completing earlier orders faster than they secured replacement business. Employment fell again as producers continued to adjust staffing levels. Business confidence improved to its highest reading since February. Even so, the measure remained below its long-term average. The July survey recorded stronger activity on production lines while order growth, exports and employment continued to trail the headline index.
Production outpaces incoming demand
Demand conditions remained the main weak point in the eurozone factory sector. New export orders declined across several major manufacturing economies. Domestic business offered limited support and produced only a marginal rise in total orders. Companies met higher production targets by drawing down unfinished work from previous months. This pushed output growth above the pace of incoming sales. The gap between those indicators remained visible as the sector entered the third quarter with smaller order backlogs.
Price growth eased during July, although manufacturers continued to face disruptions across international supply routes. Input cost inflation slowed to a five-month low. Factory gate prices increased at their weakest pace since March. Supplier delivery times remained longer than usual but improved from the previous five months. Higher energy expenses and shipping problems linked to Middle East instability continued to affect production networks. Those pressures remained present even as the rate of overall cost increases moderated.
Wider eurozone activity also expands
The manufacturing improvement accompanied faster growth across the eurozone’s broader private sector. The composite output index reached 51.9 in July, its highest level for five months. That measure combines activity in factories and service businesses. It remained above the 50 mark and signaled another monthly expansion. Manufacturing contributed through faster production, but its demand indicators remained less robust. New orders, foreign sales and employment all performed more weakly than the sector’s output measure.
Eurostat reported 0.4% growth in eurozone gross domestic product during the second quarter. The comparison covered the previous three months, when the economy recorded no quarterly expansion. Annual inflation increased to 2.9% in July from 2.8% in June. The unemployment rate remained at 6.3% in June. The combined figures showed firmer economic activity across the currency bloc. They also recorded continued weakness in factory demand despite the strongest production growth since early 2022.