High energy prices and the loss of purchasing power continue to take their toll on the Spanish economy and, in general, on the rest of Europe. This bill comes in the form of deterioration in activity and macroeconomic indicators. Thus, yesterday it was learned that the activity of the manufacturing sector in Spain has settled into a “general stagnation” in August, with a drop in the order book and a loss of jobs, although production increased very slightly compared to July. and confidence in the future remained subdued.
This is reflected in the PMI index for the Spanish manufacturing sector of S&P Global –which now integrates IHS Markit– which increased slightly in the eighth month of the year from 48.7 points registered in July to 49.9. Although a score below 50 points indicates a contraction in activity, while if more than that figure is obtained, it means that the sector in question is expanding, something that does not happen with the Spanish manufacturing industry, which continues to contract.
The economic director of S&P Global Market Intelligence, Paul Smith, argued in a statement that “inflation and the war in Ukraine are causing instabilities in the market that in turn generate an extremely uncertain outlook” and therefore confidence “remains moderate and again there were job losses in August”. For his part, Víctor Ruiz Ezpeleta, professor at OBS Business School, said that “Spain is facing a stagnation with a tendency to recession and that means there is moderate confidence in the future. The PMI data is therefore not very serious today but it is not encouraging either.
Spanish manufactures are not an exception in Europe. This activity registered its worst level in the eurozone as a whole in August for 26 months, standing at 49.6 points, from 49.8 in July, according to the same PMI.
The entire EU infected
European factory output fell at a similar pace to the previous month, when the worst contraction since May 2020 was recorded, while new orders fell “significantly”.
S&P Global explained yesterday that the “weak conditions” of the demand were a “significant drag” for the manufacturing sector. This, in turn, is a reflection of the deterioration of purchasing power in Europe as a result of high inflation. Despite this, the firm saw signs that inflationary pressure is falling “further” from its peak, as the inflation rates for input costs and sales prices eased to their 19- and 16-month lows. , respectively. That the inflation rate decreases means that the rate of increases is lower, but not that there is depreciation, that is, price drops.
According to the companies surveyed, production volumes fell due to lower incoming new orders, although some companies continued to mention material shortages.
Demand for euro zone products fell sharply again in August, marking its fourth consecutive contraction. Manufacturers linked it to rising prices, overstocked customers and reports of order deferrals due to economic uncertainty in the economy.
“The drop in sales has not only led to an increasing number of factories cutting production, it also means that warehouses are being filled with unsold stock to a degree unprecedented in the 25-year history of the study. . Similarly, commodity stocks are building due to the sudden and unexpected drop in production volumes,” said S&P Global Market Intelligence Chief Economist Chris Williamson.
- Germany and Italy. By country, Germany registered a reading of the PMI index of manufacturing activity of 49.1 points, while Italy barely reached 48 integers. In both cases, they were their worst figures in the last 26 months and reflect contractions in the manufacturing sector.
- France. In the case of the French manufacturing sector, however, this type of industry is expanding slightly, with 50.6 points, its best figure in two months.
- China. Chinese manufacturing activity fell back into the contraction zone in August as power outages caused factories to temporarily close in some parts of the country. According to the PM purchasing manager index, it fell from the positive zone (50.4 points in July) to the contraction zone (49.5 in August).