The activity of the manufacturing sector in Spain maintained growth in May, although at a softer pace, with a PMI index that fell to 51.2 points compared to the 51.7 registered in April.
"The month of May indicated a partial reversal of the growth in the manufacturing sector driven by safety stocks observed in the previous month," explained Paul Smith, economist at S&P Global Market Intelligence, alluding to the combined effect of still high prices and a context of prolonged uncertainty.
During the fifth month of the year, companies participating in the survey reported significant delays in shipping routes, a generalized lack of supplies, and a sharp increase in input costs, with a particular impact on oil and its derivatives, as a consequence of the war in the Middle East and the effective closure of the Strait of Hormuz.
As a result, the latest survey data showed that input costs advanced at the most intense pace in four years, while selling prices also increased, reflecting the pass-through of higher input costs, as companies sought to preserve their profit margins as much as possible.
"High selling prices weighed down sales," indicated the survey authors, emphasizing that this factor, along with the uncertainty linked to the war conflict, caused new orders for manufacturers to fall sharply across the board for the fifth time in the last six months.
Evolution of the manufacturing PMI in the euro area
In the euro area as a whole, the manufacturing PMI also remained in expansionary territory, although a loss of growth momentum was observed, falling from 52.2 points in April to 51.6 in May.
"Although euro area manufacturers registered an expansion for the fourth consecutive month in May, the sector shows signs of difficulty due to rising prices and supply disruptions stemming from the war in the Middle East," commented Chris Williamson, chief economist at S&P Global Market Intelligence.
At the same time, the analyst warned that supply chain delays have reached their highest level since the supply problems caused by the pandemic in 2022, adding additional upward pressure on prices.
"Factories are forced to pass on the increase in costs to customers, which will inevitably drive inflation in the coming months," said Williamson, specifying that, despite this, demand is being diminished by the increase in prices, and in May a stagnation in the order book was detected after three consecutive months of improvement.
"Monetary policymakers will be eager to curb rising inflation, but they will also be cautious about the extent of interest rate hikes, given the signs of weakening demand that are already emerging," he added.