The economic news from Spain has turned more worrisome. Eurozone purchasing managers’ indices for manufacturing showed the region’s recovery humming along nicely (December’s final index reading at 51.6, up from 51.2 in November, was in line with the preliminary estimate released last month).
But Spain is heading in the opposite direction. Activity in its manufacturing sector continued to fall, and the pace of contraction in the fourth quarter was faster than in the third quarter, according to Markit, which produces the survey. Spain’s manufacturers are also reporting far steeper job losses than in other large eurozone economies, according to Chris Williamson, Markit’s chief economist.
High unemployment could, in turn, be one reason why Spanish manufacturing output continues to contract - there is less demand for manufactured consumer products. But it does not explain why Spanish exports are also under-performing the eurozone average. Mr Williamson says anecdotal responses point to issues such as credit constraints and a lack of working capital to invest in marketing, promotion and new stock. But such problems are common across the eurozone. “This suggests that Spain’s problems also reflect the nature of the goods it produces and uncompetitiveness,” Mr WIlliamson concludes, rather gloomily.
