Eurozone industrial output reaches highest quarterly performance since early 2022

The Eurozone’s manufacturing sector completed its strongest calendar quarter in more than two years this June, as easing cost pressures and improved supply conditions offered relief to regional operators. The S&P Global Eurozone Manufacturing PMI reached 51.4, marking the fifth consecutive month of expansion. A significant factor in this stabilization was the cooling of input prices, which rose at their softest pace since March, largely due to a decline in global oil prices.

Manufacturers have relied heavily on pre-purchased inventories to navigate previous disruptions, leading to a sharp contraction in pre-production stocks as supply chains normalized. While new orders returned to marginal growth, export demand remains sluggish, acting as a ceiling on overall activity. The data suggests an industrial sector that is recovering its footing, with business confidence reaching a four-month high despite broader macroeconomic headwinds.

Output growth was particularly concentrated in the core economies, though Spain and France reported minor declines in activity. As the European Central Bank maintains its 2% inflation target, the moderation of output charge inflation provides necessary relief to buyers. The sustainability of this recovery will likely depend on whether consumer demand can absorb the capacity currently being generated by a resilient factory base.