Global Market: Eurozone manufacturing growth hits four-year high in August

Eurozone manufacturing activity expanded at its fastest pace in more than four years in August, supported by a sharp increase in new orders and robust factory output, according to a survey released on Tuesday.

The S&P Global Eurozone Manufacturing Purchasing Managers' Index (PMI) rose to 52.7 in August from 51.9 in July, marking its highest level since May 2022. The reading was slightly below the preliminary estimate of 52.8. A reading above 50 indicates expansion in manufacturing activity.

According to Reuters, the latest PMI data offered further evidence that the euro zone's industrial sector is recovering from the impact of higher oil prices and supply disruptions linked to the Middle East conflict.


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New orders recorded their strongest growth since early 2022, while export orders increased for only the second time in the past four and a half years. Overseas demand was particularly strong in Austria, Germany and the Netherlands, providing additional support to the manufacturing recovery.

Factory output also strengthened during the month. The output sub-index climbed to 53.3 in August from 52.9 in July, reaching a 54-month high. Intermediate goods, including chemicals, metals and electronic components, accounted for much of the increase in production.

Germany recorded its strongest manufacturing expansion in more than four years, while France also contributed to the broader euro zone recovery. Italy, however, reported its first manufacturing contraction since January, while Spain also remained in contraction territory.

The labour market showed signs of stabilisation, with manufacturing employment broadly unchanged in August. That marked a notable shift after more than three years of consecutive monthly declines.

Price pressures also moderated. Input cost inflation eased to a six-month low, although it remained considerably higher than levels recorded before the Middle East conflict. Output price inflation followed a similar trend.

The moderation in producer price pressures could help ease concerns over broader inflation, although the pace of disinflation appears to be slowing and price indicators remain above pre-conflict levels.

The manufacturing data comes ahead of official euro zone inflation figures due later on Tuesday, which are expected to show consumer price inflation accelerating to 3.3% in August from 2.9% in July.

Higher energy prices have complicated the European Central Bank's efforts to bring inflation back to its 2% target. According to an August Reuters poll, economists expect the ECB to raise interest rates again this month before keeping monetary policy unchanged through at least the middle of 2027.

Despite the lingering inflation risks, manufacturers became increasingly optimistic about the outlook. Business confidence improved for a fourth consecutive month, with expectations for activity over the next 12 months rising above the sector's long-term average.

The stronger order pipeline and improving confidence suggest the euro zone's manufacturing recovery may have gained momentum, although elevated energy costs and uneven performance across major economies remain key risks.

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