• Manufacturing PMI 51.7 vs 49.5 expected
• Prior 48.7

That’s a surprising jump but the details show that it is mostly on the back of a notable push up in new orders and output as clients look to
secure stock. Of note, HCOB points out that “growth in new work however in part reflected client stock
building due to the uncertainty caused by the war in the
Middle East, especially in relation to supply chains, product
availability and prices”.

Adding that underlying demand is still relatively fragile, as was the case with international demand, with new export orders declining
in April for an eighth successive month.

Besides that, there was once again another considerable accelerations in inflation pressures. Factory gate prices rose at the steepest pace since
November 2022, which led to input prices increasing to the greatest degree since June 2022 and therefore at a
rate amongst the greatest seen in the survey history (which
began in early 1998).

Meanwhile, delivery delays and higher production requirements were much more evident in April. That is evidence of supply chain issues starting to become more profound with product shortages also showing up.

Rounding that off is a further drop in employment conditions and also softening confidence levels. The latter continues to run below trend amid over
price trends and supply chain disruption.

HCOB notes that:

“Spain’s manufacturing sector recorded growth of
both output and new orders in April, marking a positive
reversal from March’s outturn. However, lift the lid on
the latest data and growth was in part supported by
client inventory building as firms raced to secure goods
given the product shortages and supply disruption
caused by the war in the Middle East. Overall, sentiment
remains historically low, and firms are expressing
notable uncertainty in the outlook.

“Moreover, amid the energy shock and supply disruption,
input prices are rising at a severe rate and to a degree
not seen since mid-2022. Crucially the level of pass
through was also significant, with selling price inflation
picking up to its fastest level in just short of threeand-a-half years. Although there remains significant
uncertainty on the length and duration of the price and
supply shock, the willingness of a notable number of
firms to raise their prices increases the possibility of
second round inflation effects already being in play.”