Because the global health pandemic caused by Covid-19 and the associated measures to contain its spread affected demand and activity, the Spanish manufacturing sector experienced considerable deterioration operating conditions, until contracting at an unprecedented rate in April.
According to the PMI index, prepared by the consulting firm Markit, there were record drops in production, new orders, export trade and purchases. Employment fell at a rate only exceeded during the height of the financial crisis, while confidence about the future plummeted up to a new series low.
Specifically, the index collapsed from the 45.7 level registered in March to 30.8 in April, indicating the second consecutive monthly deterioration in operating conditions. In fact, falling further below the 50 level of no change, the index noted a important and strongest rate of contraction since December 2008.
The companies surveyed reported that the pandemic, which has led to considerable restrictions In non-essential economic activities in Spain and around the world, it inevitably led to contractions in production, new orders and exports during April. In fact, the falls in each of these variables were the most intense ever recorded (the data was first collected in February 1998).
There were record falls in production, new orders, export trade and purchases
The results at the market group level indicated that the three subsectors covered by the study suffered a considerable deterioration in operating conditions. The PMI indices for the consumer goods and intermediate goods sector registered some levels only exceeded during the financial crisiswhile the PMI index for capital goods producers plummeted to a new low in the study.
Job destruction was considerable in April as companies responded to the enormously challenging business environment through the reduced person levelsl. The magnitude of the decline in employment was overcome only in December 2008 (during the global financial crisis) and the decline in employment was partly driven by a high level of pessimism about the future.
Confidence over the next 12 months was comfortably the lowest recorded by the study to date, as companies showed a notable concern about long-term impact in demand and economic activity due to the Covid-19 pandemic.
For their part, deflationary pressures were evident in April, and companies registered simultaneous falls in both purchase prices and sales prices. The reduction in the cost of inputs was marked and the strongest in more than four years amid reports of lower prices for metals and petroleum products. The deflation of prices charged was the strongest recorded by the study in almost 11 years.
From Markit they comment that, “although it may not be surprising given the current restrictions related to non-essential economic activities, the latest data from the PMI index for the manufacturing sector in Spain revealed the magnitude of the economic consequences for producers.” They highlight that “the records for various parameters have been broken. For example, production, new orders, export trade and purchases fell at unprecedented rates, but perhaps most worrying is the trend in business confidence and employment“
“Employment was destroyed at a rate that was only exceeded during the height of the financial crisis, as companies expressed great concern about the long-term impact the pandemic will have on demand, leading to concerns that When recovery after confinement begins, you can be much more arduous than rapid return to previous activity levels to the crisis that many long for, “they conclude.