MADRID, Jan 2 (Reuters) - Spain's manufacturing sector entered contraction territory in December for the first time since April, as both output and new orders fell amid weakening demand, S&P Global reported
on Friday.
The HCOB Spain Manufacturing Purchasing Managers' Index (PMI) dropped to 49.6 in December from 51.5 in November, indicating a deterioration in operating conditions. Readings above 50 indicate growth while those below signal contraction.
December's decline was marked by the fastest reduction in employment in two years as manufacturers opted not to renew temporary contracts in response to lower demand.
Despite these challenges, confidence in the sector's outlook improved to its highest since May 2024, driven by positive demand projections and plans for new projects.
"Spain's manufacturing sector saw an unexpected setback in December. Both output and new orders slipped below the growth threshold for the first time since spring," said Hamburg Commercial Bank economist Jonas Feldhusen.
"Despite this pullback, the industry remains more resilient than its German or French counterparts, though the latest trend raises some concerns," Feldhusen added.
Export orders experienced their steepest decline since April, exacerbated by competitive pressures and a strong euro. Input prices fell marginally for the second time in three months, allowing firms to reduce selling prices modestly.
While the sector faces headwinds from external demand and pricing pressures, the improved business sentiment suggests that December's decline may be temporary rather than the start of a prolonged downturn.
(Reporting by David Latona; Editing by Hugh Lawson)
