The manufacturing PMI index stands at 53.3 in April, the worst in the past 14 months
The impact of the war in Ukraine on inflation and energy costs is far from over. After a first quarter in which virtually all eurozone economies experienced a marked slowdown in the recovery process, some of the key macroeconomic indicators continue to show serious weaknesses, suggesting that there is still a long way to go out of the current crisis. .
This is the case with the Purchasing Managers Index (PMI) which measures manufacturing activity in Spain. That is, the rate of production in domestic factories. The indicator, one of the most followed by investors when assessing the situation in light of the crisis, fell significantly in April to 53.3 points.
It is true that when the figure is above 50, it indicates expansion. But in March it stood at 54.2 (after falling from 56.9 in February). And April’s is the worst record in the past 14 months and, what’s worse, it was below the 54 expected by the analyst consensus. So it is clear that while it continues to grow, the activity of the industry in Spain sometimes loses momentum.
“The recent lockdowns in China, in an effort by authorities to combat the new wave of the pandemic that the country is experiencing by implementing their Covid-zero strategy, has put new pressure on the supply chains of many products, which is important. has connotations. inflationary,” explains Juan J-Fernández-Figares, an analyst at Link Securities.
But there are more factors that contributed to a decline in the indicator prepared by S&P Global. “Spanish manufacturers faced a combination of issues such as supply chain issues, rapid inflation and uncertainties related to the war in Ukraine, Paul Smith, an economist at the company, explains in the report accompanying the release of the fact.
“These factors subsequently slowed production and impacted order books,” which fell for the second month in a row, according to historical series. And this in turn may be due to the inflationary gap that exists between Spain and the rest of the Eurozone, especially with top-tier trading partners such as France or Germany, as our products are now less competitive in price as they register higher inflation (8.4% in April compared to the eurozone average of 7.5%). The data also indicates that Spanish manufacturers experienced a record increase in ‘stocks’ of finished products, partly due to the recent shutdown of transport in the country.
Despite Spain experiencing a notable slowdown in industrial activity, the situation is similar across the eurozone, where high uncertainty over the outcome of the war continues to hamper domestic demand and businesses are finding it increasingly difficult to cover the cost of the rise in energy and raw material prices.
“Two of the main economies of the eurozone, the Italian and the French, did not grow in the first quarter, and the first even contracted slightly quarter on quarter (-0.16%),” the experts recall. And for the region as a whole, there was virtually no growth in the period, just 0.2% quarter on quarter.
In this environment, the Eurozone manufacturing PMI index also fell from 56.5 points in March to 55.5 points in April. They are at least 15 months and the third consecutive fall. Outside of Spain, data is from the region’s economic engine, Germany, where both new orders and production are entering contraction territory for the first time since June 2020 amid the coronavirus crisis.
“Not only did companies report that ongoing component shortages were exacerbated by the war in Ukraine and new lockdowns in China, but noted that rising prices and growing uncertainty about the economic outlook are also impacting demand,” said S&P Global. report.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
