LONDON / RankWire.AI / – Eurozone producers boosted their output in July at a rate not 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 over 50 denote expansion, while those below suggest contraction. The final index was just under the preliminary estimate of 52.0. Higher production contributed to the overall improvement, but new orders and export activity stayed subdued.
The manufacturing output index climbed to 52.9 from 51.7, reaching its highest since March 2022. Factories increased production at a much faster rate than new orders arrived. Total orders saw only slight growth in July. Export sales fell again, with France, Spain, Italy and Austria reporting weaker overseas demand. Gains elsewhere in the currency area couldn’t offset these declines. Most of the work completed during the month came from existing contracts.
Manufacturers cut their outstanding workloads at the quickest rate since January. This indicated factories were completing earlier orders faster than securing new ones. Employment declined once more, as firms continued to adjust staffing levels. Business confidence improved, reaching its highest since February. Still, this measure remained below its long-term average. The July survey highlighted stronger activity on production lines, but order growth, exports, and employment lagged behind the headline index.
Production surpasses new demand
Weak demand conditions remained a key issue for the eurozone manufacturing sector. New export orders declined across several major economies. Domestic demand offered limited support, resulting in only a marginal rise in total orders. Companies responded by drawing down work-in-progress from previous months to meet higher production targets. This led to output growing faster than new sales. The gap between production and orders was still noticeable as the sector entered the third quarter with smaller backlogs.
Price increases slowed during July, though manufacturers still faced disruptions in global supply chains. Input cost inflation dropped to its lowest in five months. Factory gate prices grew at their slowest pace since March. Delivery times from suppliers remained longer than usual but improved compared to the previous five months. Rising energy costs and shipping issues related to Middle East instability continued to impact production networks. These pressures persisted even as overall cost increases eased.
Broader eurozone activity also shows signs of growth
The manufacturing gains coincided with faster growth across the wider eurozone private sector. The composite output index hit 51.9 in July, its highest in five months. This index combines factory and service sector activity. It remained above 50, indicating another month of expansion. Manufacturing contributed through increased output, but demand indicators were weaker. New orders, exports, and employment all performed less strongly than the overall activity measure.
Eurostat reported a 0.4% rise in eurozone gross domestic product during the second quarter. The figures compare to the previous three months, which showed no quarterly growth. Inflation rose to 2.9% in July from 2.8% in June. The unemployment rate stayed at 6.3% in June. The data showed a stronger economy overall within the currency bloc, despite factory demand remaining weak. This occurred even as production growth reached its highest since early 2022.