Factory output across the euro zone grew at its fastest pace in nearly four and a half years in July, according to the latest S&P Global Manufacturing PMI survey. The headline manufacturing PMI rose to 51.9 from 51.4 in June, while the output index climbed to its highest level since March 2022, signalling continued expansion in the region’s manufacturing sector.

Despite the strong production figures, demand remained weak as new orders increased only slightly and export orders declined in several major economies, including France, Spain, Italy and Austria. Economists said manufacturers are relying heavily on clearing existing order backlogs rather than benefiting from fresh business, raising concerns about the sustainability of the recovery.

Manufacturers also continued to reduce jobs as they remained cautious about future demand. While input cost inflation eased and factory gate price increases slowed, supply chain disruptions linked to the Middle East conflict continued to affect the sector. Business confidence improved modestly but remained below its long-term average, reflecting ongoing uncertainty across the euro zone economy.

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