CdM | The expansion of Spanish factory activity moderated in August to seven-month lows, according to the Purchasing Managers’ Index (PMI), which stood at 50.5 points from 51 points the previous month, reports Europa Press. Operating conditions in the Spanish manufacturing economy, in general, continued to improve in August, although the latest data showed divergent trends in several key areas.
Thus, although new orders increased, production fell slightly, employment declined for the first time since last January and confidence in the outlook fell to its lowest level in eight months.
On the price front, input cost inflation held steady in August for the seventh consecutive month. The rate of inflation continued to ease from its recent peaks in June to its lowest level in four months.
On the other hand, manufacturing activity in the euro area in August returned to the same level of decline as in the previous two months, with a PMI reading of 45.8, repeating its worst level so far this year.
The performance of European factories was weighed down by a further ‘steep’ contraction in new orders, while the fall in total sales was the sharpest so far this year, prompting continued cost-cutting efforts as manufacturers reduced input purchases, employment and inventories.
This deeper drop in sales meant that backlogs of orders were increasingly important in sustaining production. In fact, the volumes of these orders declined at the fastest pace since February. In sum, the fall in production slowed ‘slightly’ and was noticeably weaker than that in new orders.
Nevertheless, cost-cutting and reduction measures were apparent in August. Thus, purchasing volumes declined at a pace that was not only ‘substantial’, but also the strongest since April. The volume of purchasing stocks contracted for the 19th consecutive month, while the stock of finished goods also contracted. However, the pace of decline slowed in both cases.
Afterwards, employment fell again in the middle of the third quarter and has now been negative for fifteen months. The downsizing coincided with another month of weakening business confidence. Overall, 12-month output growth expectations were the weakest since March and below the long-term average of the series.
For the third consecutive month, manufacturers reported an increase in their costs. The rate of inflation slowed ‘slightly’, but remained close to the 18-month high recorded in July. Despite the development of new orders, selling prices increased for the first time since April 2023. However, this inflation was only ‘modest’.
Of the countries covered by the PMI survey, the two large euro area economies (Germany and France) exerted the biggest drag on the industrial sector’s performance in August. The only nations to record growth were Greece, Spain and Ireland, although the rates of expansion slowed in the first two cases.
