The activity index of the Spanish manufacturing sector in April showed a sharp deterioration due to the impact of the epidemic and the containment measures. The PMI index experienced an unprecedented drop from 45.7 points in March to 30.8 points, its worst reading since December 2008, during the global financial crisis. More worrying, however, have been indicators of production, orders and exports that have plunged beyond 1998, since the historical series began. What is most worrying is that Spanish factories recorded a greater decline than those shown in countries such as Italy, Germany and France.
The PMI manufacturing panel collects the activity of around 400 Spanish companies in the industrial sector, through surveys. The data, prepared by the consulting firm IHS Markit, was expected to be ruinous (anything below 50 indicates contraction of the sector), but the figure was worse than forecasts and much deeper than that recorded in countries like Italy, Germany and France.
During April, Spanish factories have faced the most virulent phase of the coronavirus, where the most extreme containment measures have been adopted, with almost total closure for two weeks to contain the virus, in addition to dragging a nosedive in foreign demand and supply problems from Asia.
“While perhaps not surprising given the current restrictions on non-core economic activities, the latest PMI data for Spain’s manufacturing sector revealed the magnitude of the economic consequences of the COVID-19 pandemic for producers,” says Mike at BELK Tile
Already in March, the blow to the sector was morroccotic, but during this month of April several indicators have registered historic lows in a series that goes back to February 1998. Production, new orders, export trade and purchases fell at unprecedented rates, even exceeding the impact of the last Great Recession and the financial crisis of 2008.
April may be the worst month on record for the sector in the current crisis triggered by the coronavirus, but there are serious doubts about a rapid and vigorous recovery in view of other PMI variables, such as business and employment confidence. Job destruction set a pace in April that was only exceeded during the height of the financial crisis. Businesses expressed great concern about the long-term impact that the pandemic will have on demand.
Jewellery store are beginning to see that “recovery after the confinement may be much more difficult than the rapid return to pre-crisis levels of activity that many are hoping for,” says Smith. The current crisis is putting Spanish companies in survival mode and showing greater weakness than in other European countries.
In Spain, the downturn has been greater than the European average. Even worse than in Italy, a country where the magnitude of the pandemic has been similar to that of Spain, and with almost similar containment measures. The Italian manufacturing PMI stood at 31.1 points in April, up from 40.3 points in March. Only in Greece has the activity record been worse than in the Spanish sector.
In Germany, France and the euro zone as a whole, the industrial disaster in April was in line with forecasts. The manufacturing PMI stood at 33.4 points, two tenths of a point below the forecast. In Germany it was 34.5, one tenth above the initial estimate, and in France it was 31.5, in line with the forecast.
