Spain’s manufacturing sector experienced strong growth in August thanks to increased output, new orders, and job creation. The index hit its highest level since October last year, growing steadily for four months. Although inflation rates rose to a five-month high, they still remain low compared to historical averages.

Rising Demand

In August, both domestic and international demand for Spanish manufacturing grew, as shown by the increase in new orders. This rise in demand likely fueled production growth, which has risen for four months in a row, with a significant jump in August. As workloads increased, employment in the sector also grew, and the stock of finished goods decreased due to higher sales. For the first time in six months, firms increased their purchases to meet this rising demand. Different sub-sectors had mixed results. The consumer goods sector lacked clear direction, while intermediate and investment goods helped boost the overall manufacturing recovery. Input costs and output prices ticked up slightly but remained within historical ranges, indicating manageable inflationary pressures. Spain’s strong manufacturing data, showing a PMI of 53.8 for August 2025, confirms the country’s economic strength. This is notably higher than the Eurozone manufacturing PMI of just 50.2, which is barely above the expansion threshold. This clear difference could be a key trading signal for the coming weeks. With this strong economic growth, it may be wise to increase our investment in Spanish equities through IBEX 35 index futures. The index has already gained over 8% in 2025, and this new data could spark further increases. We might also consider using call options on the index to take advantage of the anticipated upward trend.

Eurozone Impact

This positive news from Spain also supports the Euro, especially since the European Central Bank (ECB) is holding steady. The ECB has kept its main refinancing rate at 3.0% for the past six months, creating a stable growth environment. We should consider building long positions in EUR/USD, as Spain’s strong performance could lift the sentiment of the entire Eurozone. In the fixed income market, the gap between Spanish and German 10-year government bonds has narrowed to its smallest point since early 2024. This indicates increasing investor confidence and contrasts sharply with the wider spreads seen during the sovereign debt crisis over ten years ago. A pair trade of long Spanish bonds against short German bunds looks appealing given this continued convergence. The report highlights that investment and intermediate goods are leading the recovery, suggesting a sustainable, business-driven expansion. This calls for a closer look at specific investment opportunities beyond the main index. We see potential in buying call options on significant Spanish industrial and banking stocks that stand to gain from increased business investment. Create your live VT Markets account and start trading now.

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