Eurozone manufacturing growth remains strong despite slight loss of momentum

According to the report from IHS Markit, manufacturers in the euro area recorded another resilient outturn in July. At 62.8, the final reading of the PMI was slightly firmer than July’s flash figure of 62.6, but down slightly from 63.4 in June and the lowest since March. Nevertheless, the sector has now recorded successive months of expansion since July 2020, with the latest reading only slightly below June’s survey record high.

The sub-sector splits of the data showed sharp expansions across consumer, intermediate and investment goods makers once again in July, with the latter boasting the fastest upturn of the three. However, a higher PMI reading at consumer goods producers contrasted with lower prints from the other two sectors.

Higher output volumes were underpinned by a continued improvement in demand for euro area goods. As has been the case over the past few months, the rate of growth in new business was steep and held close to March’s survey record. Meanwhile, new export orders expanded at a sharp rate, albeit one that was the weakest in five months. Operating capacities were tested in July, as evidenced by a considerable increase in backlogs of work across euro area goods producers. Firms responded by hiring additional staff at a rate unseen in 24 years of data collection. 

Lastly, euro area manufacturers retained their optimistic outlook for the next 12 months as the global economic recovery continues and business adjust to fewer pandemic-related restrictions. Overall, output expectations remained in firm positive territory, although the level of confidence slipped to a seven month low.