Spain's manufacturing activity contracted at its fastest rate in over three years in June as output fell again in the face of weak internal demand and sliding exports, a survey showed.
The Purchasing Managers' Index for the manufacturing sector fell to 41.1 in June, from 42.0 in May, below economists' forecasts for it to be 41.5. That was the fourteenth month the index has held below the 50 mark dividing growth from contraction.
The data suggested that Spain's economy fell deeper into recession in the second quarter after it contracted by 0.3 percent on a quarterly basis in the first three months of the year.
The Bank of Spain said on Wednesday that data for the second quarter pointed to the economy shrinking at a faster rate than the previous three months. The country is battling to as sure nervous markets it can control its public finances while the economy remains mired in recession as austerity measures bite.
The PMI also showed that the factory output index fell to 38.1 from 39.4, its lowest level since April 2009, highlighting the long journey the sector has to return to growth.
The June set of manufacturing PMI figures for Spain provide further evidence of the deep contraction currently taking place in the sector, with production, new business and
employment all falling at ever sharper rates," said Andrew Harker, economist at data provider Markit.
The current downturn stretches back more than a year and shows no sign of easing off."
He said that the effect of falling prices did little to help industry as they had cut prices so much to try to stimulate demand that profits were being hurt.
The index also showed the sector continuing to shed jobs, at a faster rate than in May, and with employment contracting for the twentieth month in a row. Nearly one in four Spani ards are out of work.
City A.M. Reporter