Spain's manufacturing sector downturn deepens in April - PMI

MADRID (Reuters) -

Spain's manufacturing sector took a sharper downturn in April, with new orders falling at the steepest rate since December 2023 and output declining for the first time since last August, a survey showed on Friday.

The HCOB Spain Manufacturing PMI, compiled by S&P Global, fell to 48.1 in April from 49.5 in March, remaining below the 50.0 mark that separates growth from contraction for the third consecutive month. It was the most severe drop in conditions since late 2023.

"Operating conditions in Spain's manufacturing sector are deteriorating," said Jonas Feldhusen, economist at Hamburg Commercial Bank.

New orders declined significantly, attributed to market instability and client uncertainty, exacerbated by U.S. tariff policies impacting international sales. Export orders fell at the fastest pace since December 2022.

Production volumes decreased modestly, allowing firms to reduce backlogs of unfinished contracts for the second time in three months. Purchasing activity also dropped sharply, with firms preferring to use existing inventories amid weak trends in output and new orders.

Confidence in future output weakened further, reaching its lowest level since last August. Employment levels showed little change, with firms cautious amid reduced orders and production needs.

"Given the poorer order situation and a reduction in backlogs, there is room for a deterioration in employment levels in the coming months," said Feldhusen.

Spain's economic growth slowed slightly in the first quarter but the manufacturing sector kept expanding rapidly, the National Statistics Institute said on Tuesday. The government expects the economy to expand 2.6% this year.

(Reporting by Reuters; Editing by Hugh Lawson)