• Parón in the Spanish industry: production, orders and employment fall, and confidence collapses

Commercial

activity in Spain

contracted in

October as the

PMI index

stood at 49.7,

below the level of 50 that marks the difference between economic expansion and decline, due to

increasingly weak demand

both nationally and and

to growing price pressure.

"The drop in activity was closely related to

lower levels of new orders

received. Companies reported that

sales fell for the third month in a row,

albeit only modestly. Companies surveyed commented on a high degree of uncertainty in markets for products amid concerns about recession and high inflation, events that led to a delay in decision-making among businesses and households, both at home and abroad

Sales abroad fell for the fourth consecutive month,

and the pace of contraction has accelerated since September," explained S&P Market Intelligence.

Despite

the fact that sales were "disappointing

" last month, Spanish companies managed to increase their workforce, although in a "marginal" way.

Thanks to that and to the fact that the rate of demand fell, they were able to catch up on their workloads.

Its biggest problem last month was

prices,

which rose in October compared to September (0.4% according to the CPI): "Inflationary pressures remained high in October, and

operating costs increased again at a historically marked pace

. In fact, the [sector's] inflation rate reached its highest in four months amid reports of

price increases by suppliers, higher wage payments and rising utility bills

. energy, electricity and fuel increased in price".

Faced with this increase in costs, companies "had no choice" but to

increase their rates charged to the final consumer

in October and, as a result, the average prices charged rose again.

"As has happened with costs, the rate of inflation accelerated in the month, reaching its highest level since last July and remaining well above its historical average," they explain.

This scenario leads companies in the sector to maintain a

very moderate degree of confidence

.

Although new products and planned projects are expected to support activity over the next twelve months, general confidence in the future was again well below average.

Companies commented on an unusually uncertain outlook, with recession and inflation concerns taking priority in October.

"Despite better-than-expected inflation figures last week,

the economic situation is deteriorating very fast

. In the meantime,

a recession seems inevitable.

Although little fourth-quarter data is yet available, we assume a contraction of 0, 5% quarter-on-quarter in the last quarter of this year.This brings annual growth to a very good 4.3% for 2022. However, for 2023, we expect the Spanish economy to grow by just 0.3% year-on-year.High inflation and energy prices combined with higher interest rates and greater uncertainty

will curb demand and investment, putting downward pressure on growth figures,"

warns Wouter Thierie, an economist at ING.

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  • Articles Alejandra Olcese