Spain’s manufacturing sector thrived in August, showing strong activity thanks to better output, new orders, and employment. The main index hit its highest level since last October, having risen steadily for four months. Though inflation rates climbed to a five-month high, they remain manageable compared to past numbers.

Rising Demand

In August, both domestic and international demand for Spanish manufacturing grew, leading to an increase in new orders. This surge likely boosted production, which has now expanded for four months in a row, with a significant jump in August. To cope with increased workloads, employment in the manufacturing sector grew, while the stock of finished goods decreased due to stronger sales. Moreover, purchases rose for the first time in six months, as companies reacted to the rising demand. Performance varied by sub-sector. The consumer goods sector remained mixed, but both intermediate and investment goods helped support the overall recovery in manufacturing. While input costs and output prices saw a small increase, they stayed close to historical averages, suggesting inflation is well controlled. Spain’s strong manufacturing report shows a PMI of 53.8 for August 2025, highlighting its economic strength. This figure is notably higher than the broader Eurozone manufacturing PMI, which is just barely above 50 at 50.2. This evident difference could serve as a key trading signal in the coming weeks. Given this positive economic trend, we might consider boosting our investments in Spanish equities through IBEX 35 index futures. The index has already gained over 8% year-to-date in 2025, and this new information could drive further growth. We could also look at call options on the index to take advantage of the expected upward movement.

Eurozone Impact

The encouraging data from Spain also strengthens the Euro, especially as the European Central Bank (ECB) seems to have paused changes. The ECB has kept its main refinancing rate at 3.0% for the last six months, which helps maintain a stable growth environment. We should consider building long positions in EUR/USD, as Spain’s strong performance may uplift the sentiment across the entire Eurozone. In the fixed income market, the gap between Spanish and German 10-year government bonds has narrowed to its smallest since early 2024. This change reflects increasing investor confidence and stands in stark contrast to the wider spreads seen during the sovereign debt crisis over ten years ago. A pair trade that goes long on Spanish bonds while shorting German bunds looks appealing, given this ongoing convergence. The report indicates that investment and intermediate goods are key drivers of recovery, pointing to a sustainable, business-led expansion. This suggests we should explore opportunities beyond the main index and consider individual stocks. We see potential in buying call options on major Spanish industrial and banking stocks that directly benefit from increased business investments. Create your live VT Markets account and start trading now.

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