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Spanish manufacturing shrinking fast

Friday, November 02 08:57:17

Spain's manufacturing sector shrank last month at it fastest pace since July, a survey showed today, in a weak start to the last quarter of 2012 after a year of recession. Markit's Purchasing Managers' Index (PMI) of manufacturing companies stood at 43.5 in October, down from 44.6 in September, and marking the 18th straight month the index was below the 50 line separating growth from contraction. October's figure compared to a forecast of 44 by analysts polled by Reuters.

"The start of the final quarter of the year saw no end to the problems affecting the Spanish manufacturing sector as the economic crisis continued to hit demand," economist at Markit Andrew Harker said. "One potential source of comfort from the latest survey was a stabilisation in new export orders, providing hope that growth in external demand may reappear by the end of the year." The new export orders index was 50.1 compared to 49.1 a month earlier, the first time it has registered growth since July 2011. Harker warned, however, that the rise in exports would not be enough to compensate for the continued and marked domestic downturn. Spain's economy slipped into its second recession since 2009 at the end of last year, weighed down by stagnant domestic demand. Massive unemployment and the euro zone debt crisis has hammered consumer and business sentiment, fueling expectations the economy will remain in recession late into next year.

Economy Minister Luis de Guindos said on Wednesday he believed the economy would not shrink as much as expected in 2012 after third quarter gross domestic product contracted by 0.3 percent from a quarter earlier, beating forecasts. The economy still faced severe headwinds into the last quarter of the year, according to the Markit survey, with output and new orders shrinking at an accelerated pace while purchasing activity declined at its fastest rate since April 2009. Strong competition between struggling firms meant output prices continued to fall even while input costs rose.

The survey also showed there was little good news for Spain's near 6 million unemployed, with more than a fifth of those polled recording a drop in employment over the month. Jobs have been cut in the manufacturing sector every month for two straight years, the Markit data showed. ( C ) Reuters