The profits of the industrial manufacturing sector in Spain as a whole grew by 1.5% last year despite the environment of high inflation and the growth of costs. Companies managed to offset the increases in costs and wages by raising the price of products and selling more. These are estimates from CaixaBank Research, which estimates the increase in results in the report “Manufacturing Industry. Sector reportâ€.
“Despite being a modest increase, given the context of rising costs experienced, it is a positive sign that the industry has managed to sustain its level of profits,” reads the report. According to the calculations of CaixaBank Research, purchases from suppliers in the country and imports implied an increase in the costs of the sector of 89,700 million. To this amount must be added 3,400 million of the increase in wages that grew on average by 7.2% after in the 2019-2021 period they remained practically unchanged with a 0.2% increase.
This rise in costs was more than offset by the increase in sales prices of 88,500 million. Additionally, the sector managed to sell more products worth 5,200 million. The difference between the increase in billing and the increase in costs is the 600 million additional profit.
The exceptional circumstance that occurred in 2022 with the sharp increase in costs and sales prices caused the margin on revenue to drop to 8% from 10% the previous year.
“Bottlenecks have been a significant problem for some branches of the Spanish manufacturing industry, with a particularly localized impact on the automotive industry and manufacturers of computer products,” according to the report. CaixaBank Research highlights that the negative factors that had affected the sector “are easing in recent months, especially after the reopening of China to trade” and they expect the manufacturing industry to grow in 2023. As can be seen in the graph, the forecast is for the sector to increase by 3.5%, almost the same as last year, when the GVA (gross value added) increased by 3.8%. In the opinion of CaixaBank, “the factors that stimulate the activity of the manufacturing industry (such as the easing of bottlenecks and the fall in energy prices) will have more weight than the negative elements (such as the tightening of financial conditions )â€.
The report states that “one of the most determining factors for the 2023 economic scenario will be the impact of the ECB’s rise in interest rates on consumption and investment decisions.” Regarding the financial situation of the companies in the sector, the work maintains that they have a “healthy position when we compare it with the economy as a whole and with other productive sectors”. It only “negatively highlights the case of the clothing and leather and footwear industries.”
According to the CaixaBank research service, the sector “presents a much healthier financial position” than in similar previous situations. In the cycle of interest rate increases between 2000 and 2005, the financial burden exceeded 10%, while in the brief cycle of 2011 increases, it even exceeded 17%. Now it stands above 5%.
