Activity in the industry in Spain showed less weakness in August than in the eurozone as a whole, according to the PMI index calculated by S&P Global based on surveys of nearly 400 companies "during the second half" of last month.
Business activity in Germany falls in August to June 2020 lows and the euro sinks below the dollar
This leading indicator of the manufacturing sector was on the verge of marking expansion (below 50 points indicates contraction in activity and above growth) in our country, while in Germany or Italy it launched a worrying recession warning.
This industrial PMI stood at 49.9 points in Spain (in contraction for the second consecutive month, see graph). With the same trend due to the blow from the rise in costs, especially due to the runaway inflation of energy, in Germany it fell to 49.1 integers, in Italy to 48 points and in the eurozone as a whole to 49.6. On the contrary, France appears among the most positive readings in the region, with 50.6 points.
The reading in our country faces a context of high uncertainty due to the duration of the Russian invasion of Ukraine, and leaves positive questions such as that “the rate of inflation maintained its recent downward trend, falling to the lowest level since January 2021 and helping to explain a similar slowdown in charged price inflation (which was the weakest in a year).
“The easing of price increases was linked in part to a lower incidence of supply delays. Although delivery times were lengthened again in August, the degree of deterioration was the lowest recorded by the survey in two years”, continues the report that accompanies the publication of the PMI index.
The damage of inflation
“New orders fell markedly again, and companies highlighted that high inflation is eroding the purchasing power of customers and is affecting the costs of a large number of inputs. [bienes intermedios para producir otros bienes]”, details Paul Smith, economic director of S&P Global Market Intelligence, who adds that, “although the fact that the inflation of prices paid and prices received remains on a downward trajectory brings some relief, the degree to which prices are increasing is still extremely high.”
Some of the best examples of the challenges facing the industry are the steel mills, one of the most energy-intensive sectors of activity, which in recent months have even had to temporarily stop production. This is the case suffered by the workers of the ArcelorMittal steel plant in Sestao, who have started September unemployed, without knowing until when, due to the rise in the price of electricity and the lower demand.
Along the same lines, Acerinox has recently announced to the representatives of the workers at the Los Barrios factory, in Cádiz, that the ERETE (Temporary Employment Regulation File) agreed in March 2022 will begin to be applied as of this 1st of September.
Strong growth in Spain
On Monday, the Organization for Economic Cooperation and Development (OECD) confirmed that Spain almost quadrupled the economic growth of all the countries that comprise it in the second quarter. The institution stated that the GDP (Gross Domestic Product) increased in our country 1.1% between April and Junecompared to the average of 0.3%, always compared to the previous quarter.
The OECD also points out that Germany recovered the level of activity prior to the pandemic at the end of this second quarter, the last economy of the seven largest (the G-7) that had yet to achieve it. Spain has not yet achieved it, and the expectations are that it will not do so until the end of 2023 or the beginning of 2024, after the recovery slowed down due to the inflation crisis and the uncertainty caused by the Russian invasion of Ukraine.
This delay in Spain in rebuilding after the historic COVID shock is explained by the greater weight of the services sector in GDP, and specifically tourism, which precisely this year has experienced its first full high season since 2019, without restrictions, with the obstacle posed by the general rise in prices.
Even so, our country leads the growth estimates for the end of 2022 and 2023, and could be the only large economy in the eurozone to escape recession, that dangerously stalks Germany.