The flash manufacturing sector Purchasing Managers’ Index (PMI) for July showed another modest improvement for the UK, although the reading is still in negative territory at 48.2. The Euro-zone value also edged up and, at 49.8, is at its highest for 3 years; India continues to have the strongest reading, but Japan and the USA were back below 50.
The improvement in the UK figure was largely driven by output returning to a neutral position of exactly 50 – the strongest reading for this element of the calculation for 9 months – although there were frequent comments about “challenging business conditions”, with major export markets seeing delayed spending decisions in the face of US tariff announcements. This also impacted on orders where there has been increased competition in international markets.
In the Euro-zone, the increase in the manufacturing PMI in the flash reading for July came despite output edging down marginally (although it is above the 50 threshold for the 5th month in a row). Total new orders were at the neutral level despite new export orders (which includes intra-EU trade) falling again – this is a trend that has been running since March 2022. Employment in the manufacturing sector continues to fall but this factor usually lags the activity cycle, so this is not unexpected.
Within the Euro-zone, data is only available for France and Germany at this stage and while both of these saw a slightly less negative reading than in June, the route to that trend was different.
In France, the flash reading of 48.4 (48.1 in June) was largely driven by a slower decline in output which more than balanced a further weakening of new orders, which fell to the greatest extent since February, with export business especially poor. The index was also helped by a slightly surprising increase in manufacturing employment, with anecdotal evidence suggesting this was mainly through the use of fixed term contracts.
For Germany, the pace of output growth slowed (although it was still positive), with the index calculation supported by total new orders which were broadly stable as new export orders continue to grow. Although employment continues to fall, the pace of this reduction eased again. The rate of increase in input costs (not part of the PMI calculation) slowed for the 6th month in a row and undoubtedly contributed to factory gate prices also falling.
There were mixed trends in Asia where India continues to have a very strong reading with the flash value of 59.2 is the highest since we started tracking the data in April 2015 (it is a fraction ahead of the previous high which was recorded in March 2024). Australia also saw an improvement on its already positive reading, with the figure of 51.6 being their best since April. Japan was the exception in this region in having a lower flash manufacturing PMI than in June, with that months marginally positive reading being converted to a negative value of 48.8 for July thanks to a sharp fall in output.
The USA also saw its manufacturing PMI decline as it also went from a positive value (52.9) in June to a negative one in July at 49.5 – this was its first negative reading in 2025. Output was still growing, albeit significantly more slowly than last month, and orders registered their first decline in 2025 thanks mainly to a fall in export business which was often attributed to tariffs, higher prices and heightened economic uncertainty. Tariffs were also to blame for significant increases in input prices, although this is not part of the PMI calculation. You can access these latest flash reports on the “PMI by S&P Global” website at https://www.pmi.spglobal.com/Public/Release/PressReleases or on request from MTA.