Eurozone Manufacturing Growth Moderates In July

The euro area manufacturing sector growth moderated in July but the pace of expansion remained elevated, final data from IHS Markit showed on Monday.

The final factory Purchasing Managers’ Index fell to 62.8 from 63.4 in June. This was the lowest reading since March.

But the reading was above the flash 62.6 and the sector has recorded successive months of expansion since July 2020.

Production growth softened in July. The rate of growth in new business was steep and held close to March’s survey record. Despite an increase in export orders, the pace of expansion was the weakest in five months.

Firms responded to the increase in backlogs of work by hiring additional staff at a rate unseen in 24 years of data collection.

Purchasing activity was lifted as part of efforts to meet growing production requirements. That said, manufacturers faced substantial supply-side challenges.

Widespread shortages of materials and poor transport availability pushed up manufacturing input prices in July at a survey-record rate. Consequently, firms raised their selling prices as they sought to pass the cost burden on to their clients.

Manufacturers retained their optimistic outlook for the next twelve months as the global economic recovery continued and business adjusted to fewer pandemic-related restrictions.

“The fact that growth of eurozone manufacturing cooled slightly in July after a record-breaking expansion during the second quarter should not itself be a major cause for concern,” Chris Williamson, chief business economist at IHS Markit, said.

With the exception of Germany, there was a broad decrease across the national manufacturing PMIs in July. In Germany, the rate of growth hit a three-month high that was the third-highest on record.

Germany’s manufacturing sector growth accelerated further and was the third highest in any month since the survey began in 1996. The factory PMI rose to 65.9 in July from 65.1 in June and also above the flash 65.6.

The manufacturing sector growth in France slowed for a second successive month and was the weakest since February. The manufacturing PMI dropped to 58.0 from 59.0 in June, but the score was below the flash 58.1.

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