MADRID (Reuters) - Factory activity in Spain shrank sharply in October in its fourth straight month of declines amid high inflation, with output and new orders dropping at the fastest pace since the height of 2020's COVID-19 lockdowns.
S&P Global (NYSE:SPGI)'s Purchasing Managers' Index (PMI) for manufacturing fell to 44.7 last month - its lowest level since May 2020 - from 49.0 in September. The 50.0 mark separates growth from contraction.
S&P Global's economist Paul Smith said the "dual collapse in both output and new orders during October...should highlight the severity of the challenges engulfing the sector as widespread economic uncertainty and the impacts of high inflation weigh heavily on demand and industry performance".
Even though the rate of price rises slowed, inflation was still negatively impacting market demand, while many firms also chose to reduce jobs, with a combination of excess capacity and growing pessimism about the future weighing on employment.
That could spell bad news for the government, which is hoping Spain can avoid the recession menacing many European countries thanks to the resilience of its jobs market.
Spain's consumer prices in the year to October rose 7.3% - the slowest pace since January. Economic growth slowed down sharply to 0.2% in the third quarter from the previous three-month period when gross domestic product expanded 1.5%.