Activity in the Spanish and eurozone manufacturing sector fell to pandemic levels in July, the lowest in more than two years, according to PMI data from S
In the case of Spain, the PMI index falls below 50 points, a limit that indicates a contraction, and is at its lowest since May 2020, at 48.7 points from 52.6 in June. Back to pandemic levels. The same happens for land in the euro zone, with the biggest drop since the confinements, with 49.8 points.
Weakened demand and inflation weigh on Spain. "Demand suffered a notable reduction, both in the national and international markets, which caused a contraction in production for the first time in a year and a half. The short-term outlook for production is clearly downwards," said Paul Smith, director of economics for S
Orders have fallen as they have not been registered "in more than two years" both due to high prices and uncertainty. "Sales have plummeted due to an increasingly uncertain environment, with some companies forecasting a recession in the second half of the year," a note notes.
As a result, business confidence falls to the lowest since spring 2020, output contracts for the first time since January 2021, "as businesses cut production in response to declining workloads." It also affects hiring, with the level of employment falling for the first time in 17 months. Among the causes, prices, the war in Ukraine, the possible recession...
The minimally positive note comes from costs, since inflation in supplies moderates with its lowest rate in a year and a half, although fuel and energy do not slow down, forcing it to be transferred to the final price. They also improve delivery times, with fewer delays.
Spain is not an isolated case. The data is repeated in Italy (48.5 points), Greece (49.1), Germany (49.3) or France (49.5). In the eurozone, the manufacturing PMI fell from 52.1 to 49.8 points, the lowest in two years and one month. “Euro zone manufacturing is entering an increasingly pronounced slowdown, adding to the region's downside risks. Output is falling at particularly worrying rates in Germany, Italy and France," says Chris Williamson, chief economist at S
There is "the steepest decline in production since the initial wave of strict covid lockdowns in May 2020," it says. The forecast for next year is for a contraction due to tensions in supply chains, the war in Ukraine and economic forecasts. "New orders are falling at a rate that, excluding the months of pandemic lockdown, is the steepest since the 2012 debt crisis, and the situation is likely to get worse," Williamson continued. The energy crisis is also worrying about this, she reminds herself.
July's is the second fall in a row for the euro zone, but now it is coming at a faster rate. There is both a lack of supplies and personnel due to a rebound in infections. Production falls in all countries except the Netherlands, with a general decline in new orders.
