Spanish manufacturing business conditions continued to improve at the end of the second quarter of 2018, although the rate of growth in the sector remained muted relative to earlier in the year.
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Output increased at the weakest pace in ten months, but the rate of growth in new orders accelerated.
The rate of input cost inflation quickened for the second month running, leading to a marked rise in output prices that was the fastest since January 2017.
The headline IHS Markit Spain Manufacturing PMI – a composite single-figure indicator of manufacturing performance – was unchanged at 53.4 in June, signalling a solid monthly improvement in the health of the manufacturing sector, but one that was the joint-weakest in ten months.
Operating conditions have now strengthened in each of the past 55 months.
Although manufacturing output continued to expand during June, the rate of growth eased to the weakest in ten months.
Where production increased, panellists often linked this to higher new orders.
There were signs of new order growth stabilising.
After easing in the previous three months, the pace of increase ticked up in June.
Meanwhile, new export orders rose at the weakest pace since October 2016.
With new orders continuing to increase, firms experienced a further accumulation of backlogs of work.
That said, the rise in outstanding business in June was only marginal.
As was the case with output, employment rose at a solid but reduced pace in June.
Those panellists that took on extra staff linked this to higher output requirements.
Support for output growth was also a factor leading to higher purchasing activity, while efforts to accumulate stocks were also mentioned.
As a result, stocks of purchases increased, following a fall in May.
Some panellists reported having raised inventories in order to guard against raw material supply shortages.
Stock shortages at suppliers led to a further lengthening of delivery times, with the rate of deterioration in vendor performance slightly stronger than in May.
Input costs increased sharply, with the rate of inflation at a four-month high.
Panellists indicated that rises in oil prices led to increased costs for related inputs such as petrol and plastics.
Higher steel prices were also reported.
With input prices rising at a marked pace, manufacturers increased their charges accordingly.
Moreover, the rate of output price inflation was the fastest since January 2017.
The weakening of business confidence since the start of the year continued in June, with sentiment dipping for the fourth time in the past five months.
That said, expectations of new order growth meant that firms were still optimistic that output will increase over the coming year. ■