Business activity in the eurozone rose for the first time in four months in July 2026, supported by stronger manufacturing output and a recovery in new orders, according to the latest flash Purchasing Managers’ Index (PMI) survey from S&P Global.
The Flash Eurozone Composite PMI Output Index rose to 51.9 in July from 50.0 in June, marking a five-month high.
“July is seeing a welcome revival of economic activity in the eurozone, but a volatile geopolitical environment means it remains to be seen if the good news can last,” commented Chris Williamson, chief business economist at S&P Global Market Intelligence.
Business growth
Manufacturing and services helped drive the overall improvement, S&P Global noted, with the Business Activity Index increasing to 51.6 from 49.4, a five-month high, while the Manufacturing Output Index climbed to 53.0 from 51.7, its strongest reading since March 2022. The headline Manufacturing PMI rose to 52.0, up from 51.4 in June.
New orders increased for the first time in five months, providing support for higher output. Although export orders continued to decline, the pace of contraction eased to its weakest level since March 2022.
On a country-by-country basis, Germany recorded its first increase in business activity in four months, while France continued to experience a decline, although at a slower pace than in recent months. Elsewhere in the eurozone, business activity expanded at its fastest rate in eight months.
Employment and pricing
The stronger demand also contributed to a modest increase in employment, the first recorded in 2026, the data showed. Growth in staffing levels was led by the services sector, while manufacturing employment continued to decline.
Outside Germany and France, the rest of the euro area recorded its strongest pace of job creation in more than two years.
“The improving picture also spreads to the labour market, where companies reported the first rise in payroll numbers so far this year as business growth expectations revived to the highest since February,” Williamson added.
Elsewhere, inflationary pressures eased further during July. Input cost inflation slowed to its weakest pace since February, although businesses continued to report rising costs. Selling price inflation also moderated across both manufacturing and services.
“Cost pressures have meanwhile cooled sharply and are now down to their lowest since the outbreak of the war in February, helping moderate the rate of inflation for selling prices across goods and services,” said Williamson. “This will take pressure off the ECB in terms of any imminent need for further rate hikes.
“However, whether all this good news can be sustained in the coming months largely depends on the situation in the Middle East. With oil prices on the rise again in recent days and shipping worries escalating, there’s a danger that the economy could relapse if inflationary pressures intensify again and supply disruptions, notably for energy, derail this nascent upturn.” Read more here.
