Spanish industrial activity continues to fall

TO cap off a ‘miserable six months’ Spain’s manufacturing economy remained mired in contraction territory during December.

Factory activity continued to fall, although there has been a drop in the rate of decline for new orders.

S&P Global’s Purchasing Managers’ Index (PMI) for manufacturing was up to 46.4 in December from 45.7 in November. But this still represents a contraction – anything above 50 is seen as growth.

With no change in employment and a noticeable jump in business confidence the previous month, there was some hope that the sector was heading towards stabilization as 2022 drew to a close.

But December saw a fourth successive month in which a decline in output was registered, and again the contraction was steep.

Similarly, new orders also fell considerably, although the degree to which sales deteriorated was the weakest since September.

Businesses reported widely ongoing uncertainty in the marketplace, and that general economic instability was hurting demand, both at home and abroad. New export orders were down for a tenth successive month, amid falling sales to nearby European neighbours.

With order books again down, resources at manufacturing plants were again deployed to clear existing contracts for a seventh successive month.

Paul Smith, Economics Director at S&P Global Market Intelligence, said: “December rounded off a miserable half-a-year or so for the Spanish manufacturing economy, with the sector probably aimed in a technical recession.

“Hit hard by elevated inflation, economic instability, and general uncertainty, both output and new orders declined sharply.

“And yet there is hope within the latest PMI dataset that the sector has at the very least stabilized, if not even turned a corner and is on a path back towards better health.

“Order books fell at a slower rate, employment was unchanged following a prolonged downturn and confidence about the future has strengthened noticeably.

“Moreover, there were also signs that the dominant themes of the pandemic, supply constraints and then exceptionally high price pressures, are dissipating. Delivery times were only modestly worse, whilst cost inflation dropped to a two-year low.”

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