Eurozone manufacturing economy returns to growth in July - IHS Markit

According to the report from IHS Markit, the euro area’s manufacturing economy recorded its first growth in a year-and-a-half during July as output and demand continued to recover in line with the further easing of restrictions on activity related to the global coronavirus disease (COVID-19). 

After accounting for seasonality, the Eurozone Manufacturing PMI registered 51.8, up from 47.4 in the previous month and an improvement on the earlier flash reading. Economists had expected an increase to 51.1. Whilst modest, the overall improvement in operating conditions signalled by the PMI was the first such occurrence recorded by the survey since February 2019. Moreover, growth was widespread, with all market groups registering PMI readings above 50.0 during July. Consumer goods was the best performing, registering is strongest expansion for over a year-and-a-half. 

Driving the overall upturn in the euro area manufacturing economy during July were returns to growth in both production and new orders. For output, the marked expansion was the first registered by the survey since the start of 2019 whilst the gain seen for new orders was the first in nearly two years and the strongest since early-2018. Latest data pointed to improved demand from both domestic and international markets. New export orders rose for the first time since September 2018,  although growth was modest and notably lagged that of overall new work.

On the price front, input prices remained inside deflationary territory for a fourteenth successive month, although the degree to which costs fell was the lowest in over a year. Competitive pressures and still weak demand meant that output charges were again cut. The decline was, however, marginal and the weakest recorded since August 2019.

Finally, looking ahead to the coming 12 months, business confidence continued to recover in July, rising since June to its highest level since January. Firms are hoping that the recent positive trends in activity and new work will continue with a broader recovery from the pandemic. Sentiment was at its highest amongst firms in Italy. Greek and French manufacturers were the least optimistic.