Spain's manufacturing sector posts solid growth in October, PMI shows

MADRID (Reuters) -Spain's manufacturing sector expanded at a faster pace in October than in the previous month, with both production and new orders rising, although new export orders declined for the second month, a survey by S&P Global showed on Monday. 

The HCOB Spain Manufacturing Purchasing Managers' Index (PMI) rose to 52.1 from September's 51.5, marking the sixth consecutive month of growth. A PMI reading above 50 indicates expansion, while below 50 signals contraction.

The uptick was driven by robust domestic demand, while external orders fell at the fastest rate in five months. Weak demand from France, attributed to political instability, and protectionist measures from the United States were cited as contributing factors.

"Beneath the surface of this encouraging growth, some signs of strain are emerging," said Jonas Feldhusen, Junior Economist at Hamburg Commercial Bank, pointing to export orders but also employment in the sector showing a marginal decline. 

"Labour market signals are turning cautious. The reluctance to expand headcount seems less structural and more tactical, likely driven by external uncertainties."

Still, confidence in the sector improved, with firms hopeful for better demand and higher sales. Some companies plan to increase investment and enhance production capabilities over the next year.

The Spanish economy is set to outperform its peers in the euro area for the second consecutive year in 2025 thanks to a tourism boom, a strong labour market helped by immigration, and domestic consumption. The government in September raised its full-year growth forecast to 2.7% from 2.6%.

Data released on Wednesday showed the economy expanded at a slightly milder pace of 0.6% in the third quarter from the previous three-month period, when it grew 0.8%. On an annual basis, the economic output expanded 2.8%.

(Reporting by Reuters; Editing by Toby Chopra)