Spain’s manufacturing sector experienced a slight slowdown in growth during May, as ongoing supply chain disruptions linked to the Middle East conflict continued to affect production and costs. According to the S&P Global Manufacturing Purchasing Managers’ Index (PMI), the index fell from 51.7 in April to 51.2 in May, indicating a modest expansion but at a slower pace. The PMI’s 50-mark is the threshold that separates growth from contraction.
Impact of Supply Chain Disruptions
The disruptions have led to increased costs and have weighed on demand, as manufacturers report a decline in client budgets and sales. Paul Smith, Economics Director at S&P Global Market Intelligence, noted that the growth seen in April, driven by safety stockpiling, partially reversed in May due to these pressures.
Output in the manufacturing sector rose for the second consecutive month, though the pace was weaker compared to April. The decline in new orders, which fell for the fifth time in six months, contributed to the slowdown. Export demand also remained under pressure, with new export orders declining for the ninth month in a row, although the rate of contraction was the weakest since February.
Job Market and Inflation Concerns
While job cuts were minimal, supply chain strains intensified significantly, with vendor performance deteriorating to the worst level in four years. Input price inflation also reached a four-year high, adding to the challenges faced by manufacturers.
Despite these difficulties, business confidence improved to a three-month high, although it remained below historical averages. Firms continue to express concerns over geopolitical uncertainties, weak demand, and the potential for further price increases.
The Spanish government remains optimistic about the economy, projecting a 2.2% growth for the year, following a 2.8% expansion in 2025. However, it acknowledges that the ongoing conflict in the Middle East could impact these forecasts.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
