The Eurozone’s manufacturing PMI rose in May to 63.1 points from 62.9 points in April. May’s final reading is the highest ever for this indicator. In the case of Spain, the manufacturing PMI rose to 59.4, its highest level since May 1998. Analysts had expected a slightly lower reading of 59.1. For the fourth month in a row, manufacturing activity expanded on a monthly basis in Spain. Any reading above 50 points indicates expansion of activity compared to the previous month, and below that level, contraction.
In its report, the consultancy highlights that in May order books increased, so that production rose sharply, and jobs were once again created. However, it also flags that less positive was the fact the supply side continued to lag, as the sharp rise in demand for inputs led to severe shortages of products and considerable inflationary pressures. Both buying and selling prices rose to their highest levels in the histories of their respective series.
According to Paul Smith, an analyst at IHS Markit, growth in the Spanish manufacturing sector is being driven by the increasing reopening of economies and the continued strength of demand, both domestically and in neighbouring European countries. However, output growth would probably have been higher had it not been for capacity constraints and continued difficulties in sourcing a wide range of inputs, such as plastics, metals and wood. In this respect, the analyst notes that while it is hoped, and predicted, these supply-side challenges will eventually abate, such shortages are inevitably leading to strong inflationary pressures. Moreover, as companies have been driven by the relative strengthening of their pricing power in recent months, prices charged are also increasing at an unprecedented rate.