Spain's manufacturing sector contracted at its fastest rate in a year and a half in June as factory output seized up, a survey showed today, suggesting economic growth is likely to stutter in the second quarter.
Markit's Purchasing Managers' Index of manufacturers fell to 47.3 in June from 48.2 in May, its lowest level since January 2010, and below forecasts for a dip to 48.0.
The reading was further to the south of the 50 line dividing growth from contraction and marked the second consecutive month below that point after seven months in positive territory.
Spain's economy is expected to slow down in the second quarter in line with the rest of the euro zone, but the data suggests it will likely fare worse than the rest, with tepid growth at best.
The headline figure was pushed down by a two point fall in the output index to 46.5 in June. The export index too fell close to 50, a bad sign for an economy that has relied on exports to drag it out of recession.
"June PMI data make grim reading for the Spanish manufacturing sector, as they showed a continuation of the declines in output and new orders seen in May," said Andrew Harker, economist at data provider Markit.
The Spanish economy grew by 0.3 per cent in the first quarter of the year from the previous three-month period, and that growth is likely to be further subdued in the second quarter.
The government has based its public deficit-cutting objectives on a 1.3 per cent growth forecast this year.
Markit data also showed a marked fall in costs faced by factories with the input price index falling sharply though holding comfortably above 50. Output prices did not drop as much, as factories continued to cut costs to stimulate demand.
Yesterday, official data showed EU-harmonised consumer price growth slipped more than expected in June to 3 per cent from 3.4 per cent in May after a month of falls in energy prices.
The data continued to show factories shedding jobs, with the employment index holding well below the 50 line, where it has been for 45 of the last 46 months.
Reuters
