MADRID, July 1 (Reuters) - Spanish factory activity shrank in June for the first time in three months as orders fell more sharply and manufacturers ramped up prices to cope with the recent surge in their costs due to the Iran war, a business survey showed on Wednesday.
The Spanish Manufacturing Purchasing Managers' Index (PMI) fell to 49.7 in June from 51.2 in May, according to the survey by S&P Global. The 50-mark separates growth from contraction.
"Output prices were raised at their fastest rate
since the autumn of 2022, which has created some uncomfortable pipeline inflationary pressures following the energy and supply shock that drove up manufacturing input prices at a rapid rate during the spring," said Paul Smith, Economics Director at S&P Global Market Intelligence.
"The recent breakthroughs in ending conflict in the Middle East may help to further alleviate some of these inflationary pressures," Smith added.
New orders fell for a second straight month, at a pace close to March's near one-year record. Export orders also declined for a 10th consecutive month, with the rate of contraction the steepest since March.
Production slipped for the first time in three months. Finished goods inventories rose for the first time in 19 months as firms reported output exceeded sales.
Employment fell for a 10th straight month, although the decline was marginal. Firms cut purchasing activity for a seventh consecutive month, with the pace of decline the steepest in just over a year.
Supplier delivery times deteriorated for a 36th straight month amid shipping delays and stock shortages.
Confidence edged up to a four-month high in June but remained below its typical level, as firms cited uncertainty over demand and the recent decline in sales volumes. Some companies still expected demand to improve over the coming 12 months, the survey showed.
(Reporting by David Latona; Editing by Hugh Lawson)
