LONDON / RankWire.AI / – Eurozone manufacturing strengthened in July as factory output reached its fastest pace in nearly four and a half years. The S&P Global manufacturing PMI rose to 51.9 from 51.4 in June. A reading above 50 signals expansion. The final result stayed slightly below the earlier estimate of 52.0. Production improved at the start of the third quarter, but demand indicators showed that the recovery remained uneven across the currency bloc.
The factory output index climbed to 52.9 from 51.7, its highest level since March 2022. Manufacturers increased production faster than they secured new business. Total new orders rose only slightly during the month. Export orders declined again as weakness in France, Spain, Italy and Austria outweighed gains elsewhere. Companies relied on previously received work to support current output, leaving production growth well ahead of fresh demand from domestic and overseas customers.
Factories reduced outstanding work at the quickest rate since January as they completed existing orders. The drop in backlogs helped maintain production despite limited growth in incoming business. Manufacturers also cut jobs again during July, extending the sector’s recent decline in employment. Confidence improved to its strongest level since February, but it remained below the long-term average. The survey showed a sector producing more goods while continuing to manage weak orders, staffing cuts and cautious business expectations.
New orders remain subdued
Foreign demand continued to weigh on eurozone manufacturing during July. Export sales fell across several major economies, while improvements in other markets failed to offset those losses. Domestic orders provided only modest support. The gap between output and new business widened as factories worked through earlier commitments. That pattern allowed companies to lift production without a matching increase in demand. It also reduced the amount of unfinished work available to support activity in later reporting periods.
Cost pressures eased during the month despite continued disruption along major supply routes. Input price inflation slowed to a five-month low. Manufacturers raised selling prices at the weakest pace since March. Delivery delays remained above normal levels, though pressures eased from the previous five months. Companies still faced higher energy expenses and transport problems linked to instability in the Middle East. The data pointed to slower price growth alongside persistent operational challenges for producers across the eurozone.
Wider economy shows expansion
The factory data formed part of a broader increase in private sector activity. The eurozone composite output index reached 51.9 in July, its highest level in five months. The measure includes manufacturing and services and remained above the expansion threshold. Growth across the wider economy supported the stronger production reading. However, manufacturing demand stayed softer than output. New orders, exports and employment all showed weaker conditions than the headline production measure during the opening month of the third quarter.
Eurostat reported that eurozone gross domestic product grew 0.4% in the second quarter from the previous three months. The economy had recorded no quarterly growth in the first quarter. Annual inflation increased to 2.9% in July from 2.8% in June. The unemployment rate held at 6.3% in June. Together, the official figures and business surveys showed stronger activity with continued pressure from weak factory demand, elevated prices and limited export growth across the currency area.