BRUSSELS / RankWire.AI / – In July, factory activity within the Eurozone expanded, with the S&P Global manufacturing purchasing managers’ index climbing to 51.9 from 51.4 in June. Any score above 50 signals growth. The final reading was slightly below the initial forecast of 52.0. This data indicates a broader sectoral improvement, although demand remained subdued despite rising factory output.
The manufacturing output index rose from 51.7 to 52.9, reaching a level not seen in nearly four and a half years. While companies increased production, growth in new orders was only marginal. Export orders decreased again for a second consecutive month, with declines noted in France, Spain, Italy, and Austria. Other member states showed improvements that did not compensate for these losses. The gap between output and demand suggests manufacturers relied heavily on orders from previous months.
Unfinished orders were cleared at the fastest rate since January, leading to a reduction in existing backlogs. This decline allowed firms to sustain higher output levels without a proportional rise in new sales. Additionally, manufacturers cut staffing levels once more during July. Business confidence strengthened, reaching its highest point since February, yet remained below the historical average. Consequently, the sector entered the third quarter with increased output, fewer backlogs, and limited growth in new work inflows.
Export demand remains under pressure
Persistent weakness in foreign sales continues to hinder the recovery of the eurozone manufacturing sector. New export orders declined across several key industrial nations, with domestic demand providing only modest support. Total new business expanded at a much slower rate than production. Companies fulfilled their current output requirements by completing existing contracts and reducing pending workloads. July’s data reflects growth in factory activity but also emphasizes the ongoing gap between goods produced and new orders received.
Despite ongoing disruptions in international shipping routes, price pressures eased in July. Inflation in input costs slowed to the lowest level in five months, and manufacturers increased their selling prices at the slowest pace since March. Although delivery times from suppliers remained longer than usual, delays lessened compared to the previous five months. Rising energy costs and transport issues related to Middle East instability continued to impact production networks, even as the pace of cost increases slowed.
Wider economic activity shows signs of strengthening in the euro area
The improvement in manufacturing coincided with a broader rise in private sector activity across the eurozone. The composite output index, which includes both manufacturing and services sectors, reached 51.9 in July. This marked its highest point in five months and remained within expansion territory. Manufacturing contributed to this growth through increased production, although demand, exports, and employment figures still lagged behind the overall output measure at the start of the quarter.
Eurostat reported that the eurozone’s gross domestic product grew by 0.4% during the second quarter compared to the previous three months. This followed no quarterly growth in the first quarter. July also saw inflation rise to 2.9% from 2.8% in June, while unemployment remained steady at 6.3% in June. Official economic indicators and business surveys point to increased activity, yet factories continue to face sluggish demand, declining exports, and staffing reductions.
}‹|end of json|›