Spain manufacturing production rises at fastest pace since January, remains above 50-point neutral mark

Manufacturing production in Spain rose at the fastest pace since January last year, remaining above the 50-point threshold mark that demarcates expansion from contraction. Inflationary pressures continued to build, with rises in both input costs and output prices at multi-year highs.

The headline Markit Spain Manufacturing PMI rose to 55.3 in December, up from 54.5 in the previous month and signalling a marked monthly strengthening of the health of the sector. Moreover, the latest improvement was the greatest since January. Business conditions have now strengthened in each of the past 37 months.

The rate of expansion in new orders also quickened amid reports of stronger client demand. Total new business growth was supported by a marked and accelerated rise in new export businesses. The rate of input cost inflation quickened to the fastest in 67 months during December amid reports of higher prices for items including fuel, milk and steel.

However, purchasing activity increased at a marked pace during December as firms responded to rising production requirements. Input buying has now expanded in five successive months. Suppliers’ delivery times continued to lengthen, with stock shortages mentioned by some respondents as having contributed to delays. Suppliers’ delivery times continued to lengthen, with stock shortages mentioned by some respondents as having contributed to delays.

"The Spanish manufacturing PMI signalled that the sector ended 2016 on a high, with growth back at the levels seen at the start of the year. The picture is much more positive than in the summer when output and new orders stagnated," said Andrew Harker, Senior Economist, IHS Markit.