Spanish Produce, Employment Further Slide

September 04, 2012 /

The Spanish manufacturing sector remained in contraction in August as output, new orders and employment all continued to decrease.

Input prices rose for the first time in three months, but firms continued to lower their output prices. Meanwhile, ongoing falls in production requirements led to a further drop in purchasing activity.

The seasonally adjusted Markit Purchasing Managers’ Index (PMI) remained well below the 50.0 no-change mark, posting 44.0. That said, the index rose from 42.3 in the previous month, and pointed to the weakest deterioration in business conditions since March.

Manufacturing production decreased for the sixteenth successive month in August. The rate of contraction remained considerable, and was broadly unchanged from that recorded in July. All three monitored market groups posted falling production during the month.

A further decline in new orders was seen at Spanish manufacturing firms. The pace of reduction remained marked despite easing to its slowest since February. New export orders fell less quickly than total new business, with the latest decline the slowest since August 2011.

Falling new orders led firms to work through outstanding business again during the month, extending the current sequence of backlog depletion to 19 months.

A further sharp decline in employment was recorded in August, with the rate of job cuts slowing only marginally from July. Firms recorded a rise in input costs for the first time in three months in August, although the rate of inflation was much weaker than the series average.

Some panellists reported that raw material costs had increased over the month. Output prices continued to decrease, with firms reporting strong competition and weak demand as the main factors behind the reduction.
Falling output requirements led to another decline in purchasing activity, the sixteenth in as many months.

In spite of decreasing demand for inputs, suppliers’ delivery times continued to lengthen. Respondents linked the latest deterioration in vendor performance to low stock levels.

Stocks of purchases decreased at a solid pace in August, although the rate of depletion was the slowest since November 2011. Stocks of finished goods also fell, with panellists reporting that this was in line with declining workloads. That said, the latest depletion of post-production inventories was only modest.

Andrew Harker, economist at Markit and author of the report, said: “The Spanish manufacturing PMI data for August again make grim reading as business conditions in the sector continued to deteriorate at a marked
rate. As the current downturn drags on into a sixteenth month, there seems little prospect of any
improvement before the end of the year.”


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