The industry’s production registers the biggest drop since 2020 due to inflation
The activity of the Spanish industry has accelerated its deterioration in October, in a month in which production has registered its biggest drop since May 2020, in the midst of the coronavirus pandemic, due to the uncertainty surrounding the economic scenario and inflation that, despite having moderated since the peak it touched in July , remains at very high levels -at 7.3%, according to data advanced last week by the National Statistics Institute-. That same uncertainty has resulted in a significant drop in new orders and the sum of all these variables has caused the sector to destroy jobs.
The PMI index of the Spanish manufacturing sector prepared by S&P Global (formerly IHS Markit) fell sharply last month from 49 to 44.7 points, which implies that it is once again below the 50 points that separate growth from contraction in activity. Job destruction accelerated in response to falling workloads, while confidence in the future plummeted to hit a twenty-nine-month low.
Export orders were the ones that suffered the most last month. According to the survey, the main factor that explains this deterioration is inflation, which affected demand and led manufacturers to pass on the rise in energy costs and raw materials in general in prices.
For the fifth consecutive month, companies reduced their purchases – there was a drop in inventories of both raw materials and finished products – and also their workforces, which suffered the biggest drop since June 2020. Confidence about the evolution of activity futures fell to the lowest level since May of that year in a scenario of high economic and financial uncertainty, high inflation and poor demand prospects.
“Spain’s manufacturing economy suffered a double collapse in both production and new orders in October, registering declines not seen since the pandemic-driven lockdowns in 2020 and, before that, the debt crisis of the euro zone in 2012″, warns Paul Smith, Economics Director of S&P Global Market Intelligence. In his opinion, this should highlight the seriousness of the challenges in which the sector finds itself, since the generalized economic uncertainty and the impacts of high inflation is strongly affecting demand and the results of the industry.The companies, he points out, responded by drastically cutting the activity of purchases and jobs, especially since at the moment there is no clear path for the crisis.
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