July's factory output gains were not matched evenly by demand and hiring
Factory output strengthened in the United States, euro area and United Kingdom while Türkiye remained in contraction, with orders, hiring and input costs revealing different foundations beneath July's readings.
Economics & Markets··Evening
The output picture behind the headline indexes
July's manufacturing surveys did not point in one common direction; they showed four different speeds. In the United States, the Institute for Supply Management's Manufacturing PMI rose from 53.3 per cent in June to 55.6 per cent and marked a seventh consecutive month of expansion. Its production subindex climbed from 52.2 per cent to 58.5 per cent, the highest since November 2021. The euro area's final PMI was 51.9, above June's 51.4, while the output index reached 52.9, signalling the fastest production growth in 52 months. The United Kingdom's final reading was cut to 51.9 from a flash estimate of 52.8, but remained above June's 52.5, and production expanded at its quickest pace in almost two years. In Türkiye, the Istanbul Chamber of Industry PMI improved from 47.1 to 47.7 but remained below the 50 threshold. Business conditions therefore stayed in contraction for 28 consecutive months and output declined for a second month. The improvement in Türkiye meant a slower contraction, while the other three surveys reported output growth.[1], [2], [3], [4]
Where did the orders supporting production come from?
The foundations of production diverged more clearly in the orders and labour data. In the United States, the new orders index rose to 56.7 per cent, the backlog of orders to 55.0 per cent and new export orders to 53.0 per cent. The employment index increased from 49.7 per cent to 52.8 per cent, returning to expansion for the first time in 33 months. Euro-area factories, by contrast, raised production by completing orders placed in earlier months. New work and export orders remained weak, and concern about future workloads led firms to cut headcounts. Growth was uneven too: Germany, the Netherlands, Austria and Greece reported rising production while output fell in France and Spain. In the United Kingdom, output, new orders and new export business all grew faster, yet the improvement in manufacturing hiring nearly stopped. In Türkiye, new orders again fell markedly; the war in the Middle East weighed on export demand, while firms reduced employment, purchasing and inventories alongside output. Similar-looking headline readings therefore rested on different combinations of backlogs, fresh demand and staffing decisions across the four markets.[1], [2], [3], [4]
Input costs and supply conditions
Input costs formed a second shared theme in July, although the measures did not describe the same thing. In the United States, the ISM prices index eased from 73.0 per cent in June to 71.1 per cent. That figure is a diffusion index showing how widespread reports of higher input prices were; it is not a 71.1 per cent increase in the price level. The supplier deliveries index rose to 58.9 per cent, where a reading above 50 denotes slower deliveries. Energy-linked price pressure and supply strain persisted in the euro area, but both eased in July and supply-chain stress was the least pronounced in five months. In the United Kingdom, input-cost inflation slowed sharply to a five-month low as delivery delays diminished. In Türkiye, input costs rose at their slowest rate since November 2025 and selling-price inflation was the weakest so far in 2026. S&P Global said that easing gave firms some room to limit selling-price increases in an effort to stimulate demand. July therefore combined stronger production in several markets with demand, employment and supply conditions that did not support that output equally everywhere.[1], [2], [3], [4]
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