A decline in new orders weighed on Spain's manufacturing sector last month, resulting in a marginal contraction. Output showed an increase though and employment levels also improved. So, there are some positive takeaways. HCOB notes that:
“The HCOB PMI slightly deteriorated in March due to decreasing order volumes and the reduction of inventory levels. Panellists reported increased client uncertainty following the erratic tariff announcements, leading to the postponement of deals. This negatively affected purchasing and inventories, as the lack of new work encouraged firms to buy fewer inputs. Overall, these subdued conditions are also weighing heavily on the business outlook, which declined significantly in March.
“Orders are declining, and inventories are being reduced, but it is not all negative for Spain’s manufacturing sector. Production is still increasing, and manufacturers are continuing to increase staff levels, although the degree of improvement in these subcategories is rather small. However, if the latest trend continues and underlying demand remains subdued, there is a definite possibility of large-scale cuts in production and employment, similar to what is happening in other European countries. The increased long-term yields following Germany's announcement of new debt of around one trillion euros could further negatively impact investments.
“Prices in manufacturing remain in comfortable areas. Both input and output prices indicate slight inflation, with inputs below and outputs around their long-term average increases. Metals are a driver of input cost inflation, but when it comes to prices charged, there was limited room for increments as competition and weaker demand weighed on pricing power.
“Manufacturing sub-sectors are showing a somewhat mixed picture. Consumer goods is improving due to solid output growth. However, operating conditions in the intermediate and investment goods sectors are more limited, especially in the latter, which has deteriorated for the third consecutive month. This could be interpreted as Europe’s automotive crisis transmitting to Spain, as autos are incorporated into the investment goods sector.”
This article was written by Justin Low at www.forexlive.com. Read More Details
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