Behind Spain’s New and Improved Manufacturing PMI

According to a report by Markit Economics, Spain’s manufacturing PMI (purchasing managers’ index) rose to 55.8 in October 2017, compared with 54.3 in September 2017. The PMI figure beat the preliminary market estimation of 54.9, and October’s index level was the strongest expansion we’ve seen in Spain since May 2015.

The stronger performance in Spain’s manufacturing PMI was mainly due to the following:

• strong improvements in production volumes and output in October, in addition to rising client demand
• a faster rate of new business orders and export orders in October
• a faster rate of employment in the manufacturing sector in October

The iShares MSCI Spain Capped ETF (EWP), which tracks Spain’s performance, rose 1.6% in October 2017. The Vanguard FTSE Europe ETF (VGK), which tracks Europe’s (HEDJ) (EZU) (IEV) economic performance, rose 0.75% for the month.

The solid improvement in Spain’s manufacturing PMI is signaling that both the domestic demand and international demand have picked up. Businesses improved their purchasing activity, while a shortage of raw materials affected delivery time periods.

Inflationary pressures also improved in the economy. These improvements in Spain’s economic activity are meanwhile adding value to the overall performance of the Eurozone (VGK) (IEV) (EZU).

In the next part, we’ll analyze the Eurozone’s final manufacturing PMI for October 2017.