July’s flash purchasing managers’ indices (PMIs) show a global economy regaining some momentum at the start of the third quarter, while giving treasurers more moving parts to build into their forecasts.

Expansion was the common headline. The US composite PMI reached an eight-month high of 53.6, Japan strengthened to a five-month high of 53.1 and Australia improved to 52.6. The eurozone and UK both moved back above the 50.0 no-change mark, at 51.9 and 52.1 respectively, while India remained ahead of the pack at 54.3 despite slowing to its weakest pace since March 2022

The figures show demand holding up despite higher costs, geopolitical disruption and policy uncertainty. The more difficult question is how durable the July improvement will prove. Across the reports, companies were still dealing with Middle East-related supply disruption, fragile confidence, stock-building decisions, uneven export demand and the challenge of passing costs through to customers without damaging volumes.

For finance teams, the surveys matter because they reach the forecast before official data does. Orders, exports, delivery times and price pressures all feed quickly into revenue assumptions, working capital needs, hedging decisions and board-level risk appetite.

July’s data complicates those forecasts because the moving parts are not pointing in the same direction. Domestic demand is improving in several markets, exports remain uneven, inventories are being rebuilt as a buffer against disruption and price pressures are easing in some regions while intensifying in others.

A broader upturn with uneven foundations

Australia’s data showed one of the clearest monthly improvements. The composite PMI rose to 52.6 from 50.4 in June, its highest reading since the start of the year. Services activity accelerated to 53.0, while the manufacturing PMI edged up to 51.7, although manufacturing output was still broadly flat at 49.9.

The more useful signal came from demand. New business increased for the first time in five months, ending the longest period of decline since the start of 2024. Hiring also strengthened, with job creation at its fastest since April. Softer cost inflation gave companies more room to protect margins, although business confidence remained historically subdued and export sales fell more sharply.

Eleanor Dennison, economist at S&P Global Market Intelligence, said the figures provided “some comfort” that conditions were improving for Australian businesses, with demand “rising for the first time in five months”. Australia’s recovery looks domestically anchored, with companies finding firmer ground at home while international demand continues to weaken.

Japan delivered the strongest manufacturing story in the set. The composite PMI rose to 53.1, supported by the steepest increase in manufacturing production since February 2014. Manufacturing output reached 56.1, while the headline manufacturing PMI held firm at 54.7. Services growth eased to 51.9, leaving the expansion increasingly factory-led.

New manufacturing orders rose at the fastest rate in just over five years and goods export demand strengthened. Capacity pressure also continued to build, with backlogs rising at the strongest rate since February’s series record. Companies added staff for the thirty-fourth consecutive month.

Usamah Bhatti, economics associate director at S&P Global Market Intelligence, said Japanese growth momentum had strengthened, with “a stronger expansion in manufacturing contrasting with softer growth in services”. He also warned that “the cloud of war in the Middle East continues to loom” over the private sector. Stock-building by manufacturers shows how that risk is entering working capital, procurement and margin planning, even as headline growth improves.

India remained one of the faster-growing economies in the flash data, but July brought a clear loss of pace. The HSBC composite PMI fell to 54.3 from 57.1, marking the slowest expansion in private sector activity since March 2022. Services activity dropped sharply to 53.1, its weakest level in 53 months, while manufacturing output improved to 57.0.

The slowdown reflected weaker growth in new orders and output, with companies reporting more challenging market conditions, competitive pressure, order cancellations, fewer client enquiries and shortages of key raw materials. Exports gave India the offsetting signal, rising at the strongest composite pace since March and led by goods producers.

Pranjul Bhandari, chief India economist at HSBC, said renewed Middle East tensions had pushed firms to build buffers against uncertainty, with finished goods and input inventories rising alongside stronger purchasing. Price pressures also firmed, with output charge inflation signalling “a renewed push to protect margins”.

Europe returns to growth

The eurozone returned to growth after three months of stagnation or contraction. The flash composite PMI rose to 51.9 from 50.0 in June, its highest reading for five months. Manufacturing output climbed to 53.0, the strongest since March 2022, while services activity recovered to 51.6 after three months of decline.

A renewed rise in new orders supported the upturn, with overall demand increasing for the first time in five months. Export orders were still falling, including intra-eurozone trade, but only marginally and at the slowest pace since March 2022. Germany grew for the first time in four months, France’s downturn softened and the rest of the eurozone posted its strongest expansion in eight months.

Chris Williamson, chief business economist at S&P Global Market Intelligence, described July as “a welcome revival of economic activity in the eurozone”, although he warned that a volatile geopolitical backdrop meant “it remains to be seen if the good news can last”.

Prices gave the eurozone a second point of relief. Input cost inflation slowed to its lowest since February and selling price inflation moderated across manufacturing and services. Williamson said this would take pressure off the European Central Bank “in terms of any imminent need for further rate hikes”. For finance teams, that combination of revived growth and softer price momentum is helpful, provided oil, shipping and energy risks do not intensify again.

The UK also moved back into expansion. The composite PMI rose to 52.1 from 49.3, signalling the first increase in private sector output since April. Manufacturing output rose to a 22-month high of 53.6 and services returned to growth at 51.8.

Factory momentum was striking. Manufacturing production expanded for a fourth successive month, with new order growth the strongest since February 2022. AI roll-outs, data centre supply chains, defence spending and stronger export sales to US and European customers all supported manufacturing order books. Services had a more seasonal lift, with hospitality demand helped by good weather, domestic holidays and the FIFA World Cup, while client uncertainty around the Middle East remained a drag.

Williamson said UK businesses reported “stronger activity in July”, pointing to faster growth at the start of the third quarter. He noted that manufacturing was unusually growing faster than services, helped by rising exports, but cautioned that part of the factory upturn could be short-lived because some activity reflected precautionary stock-building.

Hiring remains the weak point in the UK data. Employment fell again, driven by service-sector job cuts, despite the renewed improvement in output and new work. Input price inflation eased for a third month, helped by lower fuel bills and softer raw material cost inflation, but companies continued to report higher wages, technology hardware costs and logistics bills.

US growth accelerates but price risks return 

The US produced the strongest headline reading among the larger developed economies. The composite PMI rose to 53.6 from 51.9, consistent with the fastest business activity growth since last November. Services led the upturn, also reaching 53.6, while manufacturing output slowed to 53.6 from 56.2 and the manufacturing PMI edged down to 53.8.

Domestic demand drove the expansion. Companies reported stronger services inflows, FIFA World Cup-related spending, July 4th activity and increased investment in sales, marketing and product development. Exports of goods and services continued to fall, however, and manufacturers reported the weakest gains in output and order books since March.

Employment rose for the first time in three months, although only marginally. Business expectations improved to an eight-month high, driven by services, while manufacturing optimism slipped on weaker demand growth, trade concerns, geopolitical uncertainty, tariffs and high costs.

Williamson said US businesses had made “a good start to the third quarter”, with the data broadly consistent with annualised GDP growth of 2.0%, against 1.2% signalled for the second quarter. He added that July saw “an encouraging return to hiring”.

The warning sat in costs and supply chains. Supplier delays worsened to the greatest extent in nearly four years, linked to disruption around the Strait of Hormuz, demand for safety stocks and tariff-related availability issues. Input cost inflation reached a 14-month high and selling price inflation was the strongest since August 2022. Williamson said the recent intensification of Middle East tensions raised downside risks, suggesting July’s upturn “may not be the start of an improving trend”.

Why the rebound is hard to forecast 

Manufacturing looks stronger than it did at the end of the second quarter, particularly in Japan, the eurozone and the UK. The question for treasurers is what sits behind that improvement. Stronger factory output partly reflects better orders and export demand in some markets, but also stock-building in response to supply risk.

For cash forecasts, inventory data carries a warning. Stock-building can bring purchases and working capital forward, but it may reflect caution about supply rather than confidence in end demand.

Japanese manufacturers increased purchasing at the fastest pace in more than four years and lifted stocks of finished goods for the first time in two years. Indian firms increased input and finished goods inventories as buffers against supply uncertainty. UK manufacturers continued to build precautionary stocks, while US producers reported that earlier inventory gains were beginning to fade as supply delays worsened.

Export patterns are also uneven. India’s export orders strengthened. Japan saw goods export demand improve, even as foreign demand for services fell. The UK reported stronger export sales to US and European customers. Eurozone export orders were still declining, though only marginally. Australia and the US both saw weak external demand. That split matters for companies exposed to cross-border sales, supplier concentration or currency volatility.

Price data gives treasurers little comfort in either direction. Cost inflation eased in Australia, the eurozone and the UK. Japan also saw a slower rate of input cost growth, although selling prices still rose sharply, particularly in services. India’s input and output price inflation accelerated. The US stood out as the clearest inflation warning, with input costs and selling prices both rising sharply.

This leaves finance teams with a less comfortable picture than the headline PMI rebound suggests. Some of the improvement is being carried by temporary events, stock buffers or sector-specific demand such as AI infrastructure, data centres and defence. Some cost relief reflects lower fuel prices earlier in the month, while more recent Middle East developments threaten to reverse that benefit.

Cash forecasts may need to allow for stronger domestic receipts in some markets, weaker export pipelines in others, higher inventory funding, delayed supplier payments where shipments are disrupted and renewed pressure on margins where costs are being passed through unevenly. Hedging decisions may need to account for renewed energy, shipping, currency and rates volatility.

Pricing power will be tested too. Companies in several regions are still passing higher costs through to customers, but softer order growth in India, weaker US manufacturing momentum and subdued Australian confidence show the limits of that strategy. Where customers are sensitive to price, margin protection may require cost control, procurement flexibility and more disciplined contract terms.

A challenging second half to predict 

July’s flash PMIs give companies and policymakers reasons to be more confident than they were at the end of the second quarter. Growth has broadened, Europe and the UK are back in expansion, Japan’s factories have accelerated and the US services economy has regained momentum.

The recovery still has several fault lines. Middle East disruption is visible in comments on energy, shipping, supplier delays, inventories and confidence across regions. Employment is improving in some markets but weakening in the UK. Export demand is inconsistent. Price pressures are easing in parts of Europe and Australia, but intensifying in India and the US.

The July rebound gives companies something to build on, but it does not settle the forecast. Stronger PMIs may support investment plans and revenue forecasts, but the operating environment still argues for close attention to liquidity, margins, supplier resilience, pricing assumptions and geopolitical risk.

The second half has opened with more growth than many businesses saw in June. Turning that into a durable upturn will depend on the same variables now sitting inside corporate forecasts: energy costs, shipping reliability, export demand, pricing power and the amount of inventory companies are willing to fund while the outlook remains uncertain.