Euro Manufacturing Expands, but Demand Remains Weak

European manufacturing had its strongest month in expansion since April 2026, according to preliminary data from the S&P Global/HCOB Manufacturing PMI. The headline reading hit 52.0, a sixth consecutive month of growth and well above expectations. However, beneath this surface-level success lies a more nuanced picture.

While factories were busy due to a backlog of old orders being fulfilled at their fastest pace since January 2026, new orders only saw a marginal increase. Export orders actually declined further, posing a problem for Europe's industrial base, which relies heavily on selling goods abroad.

The region's manufacturers are still passing on costs to buyers, with output price inflation remaining elevated. Input cost inflation did fall to a five-month low, providing some relief for margin-squeezed companies. Business confidence improved to its highest level since February 2026, but remains below its long-run historical average.

For investors, the crucial question is whether new orders will start to recover in the coming months. If they do, the output gains may have a solid foundation. But if demand stays flat or declines further, July's surge could be seen as a peak rather than a launchpad.