Modest growth of Spanish manufacturing sector signaled in October - IHS Markit Spain Manufacturing
Spain's manufacturing sector continued to expand during October, with faster gains in output and new orders both recorded. As capacity came under renewed pressure, manufacturers added to their workforce numbers, albeit at a modest rate as business confidence regarding the future slumped to its lowest level since mid-2013. Meanwhile, latest data showed that rising prices for energy, foodstuffs and metals contributed to another round of noticeable input cost inflation. The headline IHS Markit Spain Manufacturing PMI, a composite single-figure indicator of manufacturing performance, registered 51.8 during October. That was up from 51.4, but nonetheless indicative of a relatively modest improvement in operating conditions.
Moreover, growth was again at a level well down on those seen around the turn of 2018. This reflected similar trends in output and new work, which both increased at stronger rates compared to September but nonetheless remained lower than earlier in the year.
There were nonetheless a number of reports from panelists of an upturn in demand, especially from international clients. New export orders rose at the fastest pace since July, and foreign sales have now risen on a sustained monthly basis throughout the past five-and-a-half years.
October’s survey indicated that capacity came under some renewed pressure as evidenced by a rise in backlogs of work. A number of manufacturers were suitably encouraged to add to their workforce numbers, extending the current period of growth to just under five years.
Modest jobs growth occurred in spite of deterioration in business confidence. Latest data showed that sentiment regarding future activity declined to its lowest level since June 2013. The recent downturn in underlying demand growth, linked to worries over global trade, plus political uncertainties, were reported to have undermined confidence.
Providing further concerns over future output growth was another build-up in stocks of finished goods. Warehouse inventories rose during October for a fourteenth successive month, with some firms linking stock accumulation to an overproduction of goods relative to the flow of new work.
Meanwhile, lead times for the delivery of inputs continued to lengthen, but at a slower rate. Although purchasing activity increased again in October, placing pressure on suppliers, the degree to which times worsened was the weakest in over two years.
Input prices continued to increase during October. Energy, foodstuffs (especially cereals and wheat) and metals (steel in particular) were all reported to have increased since September. Output charge inflation subsequently accelerated to a three-month high.
Commenting on the PMI data, Paul Smith, Economics Director at IHS Markit said "Although picking up a little during October, the latest data remain consistent with only marginal growth of the manufacturing sector heading towards year end. This is a far cry from the strong rates of expansion seen towards the end of 2017 and the start of this year, although the slowdown is closely intertwined with the downturn of the global trade cycle that has affected many manufacturing economies around the world. Nonetheless, the near-term outlook looks subdued, with inventories in the sector continuing to build and business confidence softening on the back of concerns over global trade trends, political uncertainties and faltering demand growth."
Source : Strategic Research Institute