Spanish manufacturing activity suffered in August from uncertainty and economic deterioration. This is clear from the Purchasing Managers’ Index (PMI), which fell to 46.5 from 47.8 in July, representing its fifth consecutive decline and the lowest level so far this year. The contraction, the most intense since the pandemic, is due to the decrease in orders due to the fragility of demand, which “generated downward pressure on prices,” they explain from the firm in charge of preparing the index, S
The weakness comes mainly from domestic demand, while new export orders fell at roughly the same rate as in July, says Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. However, the contraction of orders intensified “markedly”. “We are fairly certain that the manufacturing sector has entered a recession, which began in the second quarter,” he warns, while predicting that in the short term “it will get worse before it gets better again.”
Although the data does not help, there is hope. Surveys indicate that industrial firms remain “quite” optimistic and expect an increase in production in the next twelve months, so they stopped cutting staff after two months of slight reductions. As for purchase prices, they continued to decline, although to a lesser extent than in July. In any case, the cost of production contracted for the sixth consecutive month, which is expected to help reduce inflation, which picked up three tenths in August, up to 2.6% year-on-year.
The weakness of the manufacturing sector contrasts with the resistance of the rest of the Spanish economy: the services sector has shown constant growth since November, while the country’s gross domestic product continues to show positive rates, of 0.4% in the second quarter and of 1.8% so far this year, still below the 2.1% forecast by the Government for this 2023.
Activity in the manufacturing sector in the euro zone contracted again in August with the PMI index standing at 43.5 points, although it improved slightly compared to July, when it reached 42.7 points. Although a reading below 50 indicates an economic contraction, the data for the last month represents a rebound from the 38-month low registered in July and implies that the indicator is at a maximum of the last three months.
However, the industry “remains under intense pressure” from plummeting new orders and rapidly declining backlogs. Likewise, employment levels in the factories continued to fall, albeit marginally, and the cost of inputs continued to fall, since “companies chose to pass on the reduction in costs to their customers in order to increase the competitiveness of their products “, they conclude from S
None of the four eurozone economies emerged from the terrain of industrial contraction, although Spain scored best on the index (46.5), followed by France (46), Italy (45.4) and Germany (39. 1).
