Spanish industry seems to stand out from the weakness that the sector reflects with each new data among its European peers, especially that of its traditional stronghold, Germany. Spain’s manufacturing sector rebounded strongly in September, according to Hamburg Commercial Bank’s (HCOB) S&P Global PMI indexes compiled from surveys of purchasing managers of private sector companies, one of the leading indicators of the most observed activity.
According to the report published this Tuesday, The index relating to the manufacturing sector in Spain stood at 53 points in Septemberabove the 50.5 recorded in August and with the strongest growth in operating conditions since May. Likewise, it far exceeds the expectations of analysts, who expected a figure of 50.2 points. The PMI index thus remains above the 50 point level, which separates growth from contraction, for the eighth consecutive month.
Next to the increase in orders and productionAlso improved employment and business confidence as well as purchases of inputs. The increase in purchases, the report said, was the best in four months, reflecting positive production projections, which also caused input stocks to increase at the strongest rate in twenty-five months.
“Spain is and remains an atypical case among the main countries of the euro zone,” recognizes Jonas Feldhusen, economist at HCOB, who underlines a increased demand from the UK. “These are truly surprising developments, as the trend in previous months clearly indicated stagnation. However, new orders and production improved significantly this month, contrary to my forecast in August. While the “Industry sentiment in Germany and France remains weak, anecdotal evidence suggests that the increase in new orders is due to increased demand from the UK,” writes Feldhusen.
Regarding this improvement in business confidence, the report highlights new product launches and “the hope of more stable political conditions”. “Due to increased production and increased optimism, Spanish manufacturers have also increased their workforce. This positive trend indicates that companies are now facing the coming months with more confidence,” they conclude.
The picture contrasts with the weakness that continues to emanate from the rest of Europe, particularly the two major economies, France and Germany, which weigh down overall euro zone data. The Eurozone manufacturing sector PMI index finally settled at 45 points in September (45.8 in August), marking its lowest level in nine months. In turn, the PMI index for production of the manufacturing sector in the region reached 44.9 points (45.8 in August), also recording its lowest level in nine months. New orders and production are falling at the fastest pace since December 2023.
De la Rubia (HCOB): “Spain simply does not have enough weight to lift the rest of the eurozone”
“It’s a real shame that Spain is only the fourth largest economy in the Eurozone. Although it has managed the slowdown in global manufacturing surprisingly well, Spain simply does not have enough influence to drag the rest of the Eurozone with it. For example, the deepening industrial collapse in Germany is too great for Spain’s boost in September to make much of a difference,” admits Cyrus. la Rubia, HCOB chief economist in charge of Eurozone PMI indices.
According to its real-time forecasting model, Euro zone industrial production expected to fall by around 1% in the third quarter compared to the second quarter. With new orders received declining rapidly, HCOB expects a further drop in production towards the end of the year.
Focusing on European weakness, De la Rubia puts the index finger on employment: “What started as a slow series of job cuts in the middle of last year has now become a problem. fairly significant reduction in employment. “This will probably soon be reflected in the less up-to-date official unemployment statistics, which so far are quite stable.”
The expert emphasizes that it is not only the drop in demand that affects companies, but also the fact that they are faced supply chain issues: “This combination is quite rare, and in the last thirty years we’ve only really seen it during the pandemic. Usually when demand drops, delivery time issues tend to lessen. But this time, since June, the index which tracks deliveries Difficulties decrease in parallel with those of new orders and, for the first time since February, companies report having to wait for their products even longer than the previous month Geopolitical tensions obviously weigh. heavy in this regard.
Price-wise, we’re not out of the woods yet. “The European Central Bank will be happy to see that purchase prices fell in September, especially after three months of rising prices. Lower oil and natural gas prices helped reduce input costs, and companies passed on some of that reduction to their customers. You shouldn’t relax too much: these price cuts may not last. Because the situation in the Middle East is worsening, it is still possible that energy prices will skyrocket again,” says De la Rubia.
