- Prior 50.0
Spain’s manufacturing sector activity falls back into contraction territory as the Middle East conflict starts to have an impact. The heightened uncertainty raised by the conflict and higher energy prices are feeding into supply-chain disruptions as well as rapidly rising prices for fuel and inputs. And that is resulting in manufacturers reporting accelerated declines in output and new orders.
Besides that, employment conditions also declined with the outlook also taking a hit amid a steep deterioration in manufacturing sector confidence.
Of note, input price inflation accelerated sharply to its highest level since late 2022. Expect this trend to also show up across the whole region with regards to the PMI readings today. In turn, that will keep the ECB guarded amid fears of inflation spiking higher in the months ahead. For now, headline inflation is the one being impacted but it could very well spill over to core prices down the road.
HCOB notes that:
“Spain’s manufacturing economy returned to contraction territory during March as the Middle East war put pay to any hopes in February of a short-term improvement in performance. Output and new orders both fell, whilst confidence collapsed in the face of hostilities in the Middle East with firms extremely worried about the prospect of a prolonged global economic slump in the face of an energy-induced surge in inflation.
“Much of the outlook remains dependent on how the conflict now unfolds. A quick resolution would likely only mean a temporary setback for sector performance, but for the moment, business conditions have deteriorated noticeably. Alongside the slump in confidence, input cost inflation has accelerated rapidly and now stands at its highest level since late 2022. Not surprisingly, supplychain disruption is also widespread, with input delivery times lengthening markedly. And firms are somewhat understandably responding to heightened uncertainty and falling order books by cutting jobs and lowering purchasing activity accordingly.”
This article was written by Justin Low at investinglive.com.