Despite the challenges, price developments showed a slight easing of input costs. Although raw material and supplier costs continue to rise, price pressures are generally within a normal range.
Sector Disparities
Disparities across sub-sectors were observed, with consumer goods growing while investment goods contracted for two months. The intermediate goods sector experienced only marginal improvement.
The employment index has entered contraction territory for the first time in six months, though large-scale layoffs appear unlikely. Manufacturers remain cautiously optimistic despite ongoing uncertainties in the market.
This latest data suggests the manufacturing sector in Spain is facing renewed strains after a period of relative stability. A reading below 50 signals contraction, and at 49.7, it falls below expectations. The fact that new orders have slipped for the first time since mid-2024 highlights waning demand, which, if prolonged, could further pressure the sector.
While factories have kept production running at a reasonable pace, backlogs of work are being cleared rather than new business driving output. This may explain why some firms have started reducing staff, though job cuts so far have not been severe. Concerns remain, yet sentiment among manufacturers has improved, possibly reflecting expectations of better conditions ahead.
Labour Market Concerns
Costs remain a mixed picture. On one hand, raw material prices are still climbing, but broader input costs have eased slightly. For businesses operating on thin margins, any relief helps, though the overall situation suggests inflationary pressures are not entirely gone.
A closer look at sub-sectors reveals differences in performance. Consumer goods have maintained growth, suggesting steady household demand. However, investment goods have now shrunk for two consecutive months, hinting that businesses may be holding back on equipment purchases. The intermediate goods category has fared slightly better but lacks strong momentum.
A weakening jobs market is a concern, as the first drop in employment in half a year suggests firms are tightening operations. No evidence points to widespread redundancies, but this shift in hiring decisions reflects caution. Still, firms remain reasonably confident about future conditions despite the hurdles they currently face.
For those tracking price movements and labour market shifts, recent trends present both risks and opportunities. Some areas of manufacturing may benefit from improved sentiment, while others continue to struggle under weaker demand. Confidence alone won’t drive a recovery, but how firms react to cost pressures and employment changes in the weeks ahead will provide an indication of underlying resilience.
