Floods Slow Spain’s Manufacturing Growth

Spain’s manufacturing sector experienced slower growth in November, impacted by devastating floods in Valencia, a key eastern coastal region, according to a survey released on Monday. Despite this setback, confidence in future expansion remains high.

The HCOB Spain Manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, dipped to 53.1 in November from 54.5 in October. While this marks a slowdown, the index has remained above the 50.0 growth threshold for ten consecutive months.

The decline was partially attributed to the historic floods on October 29 and 30, which claimed over 200 lives—the deadliest in modern Spanish history.

Despite these challenges, manufacturing output and new orders continued to grow, driven by strong export demand, particularly from neighboring European countries. New export orders rose at their fastest pace since September 2021.

“The Spanish manufacturing sector maintained its expansion in November, albeit at a slower rate, even amid the tragic floods in Valencia,” said Jonas Feldhusen, Junior Economist at Hamburg Commercial Bank, in S&P Global’s monthly report.

Employment in the sector increased for the third straight month, fueled by higher workloads and production needs. Input cost inflation edged higher but remained modest, with companies citing rising raw material prices, especially for metals. However, competitive pressures led to a slight drop in output charges for the third consecutive month.

Business confidence reached its highest level since May, reflecting optimism about a stable global economic outlook and positive outcomes from planned commercial initiatives.

The November PMI data indicate that the robust economic growth seen in the third quarter likely carried over into the fourth. Spain’s statistics agency reported that the economy grew by a stronger-than-expected 0.8% in Q3, outpacing the euro zone’s 0.4% average, with annual growth hitting 3.4%. The government has also revised its 2024 growth forecast upward to 2.7%.