2023.02.0113:06:00UTC+00Spain Manufacturing Contraction Softens In January

Spanish factory sector downturn eased at the start of the year as output and new orders fell at slower rates, indicating some tentative signs of market recovery, data released by S&P Global showed on Wednesday.

The manufacturing Purchasing Managers' Index rose to 48.4 in January from 46.4 in December. Economists had forecast the reading to improve to 48.0. A reading below 50 suggests contraction in the sector.

This was the seventh successive downturn in the Spanish manufacturing sector, though the softest contraction since September last year.

In January, Spanish manufacturers reported declining orders for the eighth consecutive month despite reports of muted underlying demand. The decline in new export orders also moderated.

Firms reduced their production for the fifth straight month, albeit at the softest pace since last September.

Continued reduction in backlog work at the start of the year indicated further evidence of spare capacity in the manufacturing sector, the survey said. Meanwhile, manufacturing employment remained stable.

On the price front, input cost and selling price inflation rates both eased to 27- and 24-month lows, respectively.

Looking ahead, Spanish manufacturers remained confident about year-ahead production expectations in January, with the degree of optimism the strongest since June 2022 amid hopes for successful product launches, business expansion plans and upcoming projects.

"With interest rates rising and demand generally muted, it is expected that we will see the inflationary environment continue to cool over the coming months," Laura Denman, an economist at S&P Global, said.