Eurozone Manufacturing Growth Fades as Backlog Clearing Takes Over

The Eurozone's manufacturing sector has seen its fastest growth in nearly four and a half years, but this increase is largely driven by companies clearing backlogs rather than new demand. According to the S&P Global Eurozone Manufacturing PMI Index, output rose to 52.9 in July from 51.7, its highest level since March 2022.

Despite this growth, there are warning signs that momentum may fade as autumn approaches. Orders rose only marginally in July, well below the pace of output growth, suggesting factories are running hot on old work rather than new business. Export orders fell again, with declines in France, Spain, Italy, and Austria more than offsetting gains elsewhere.

Employment in the sector continued to fall in July, extending a run of job cuts as companies grew more cautious about the prospect of a slowdown in work. However, input cost inflation eased to a five-month low in July, and factory gate prices rose at their softest pace since March.