Spain’s manufacturing sector saw growth in May for the first time since January. The HCOB Manufacturing PMI rose to 50.5, beating expectations of 48.4 and improving from April’s 48.1. This increase suggests better output and employment, with a slower drop in new orders. The PMI’s rise might indicate easing global trade tensions, and Spain’s lower dependence on the U.S. market compared to Germany or Italy helps too. Production picked up, with positive trends in demand and output thanks to improved sales conditions. Although new orders are still declining, the pace has slowed, suggesting stabilization. Companies are increasing their inventories of intermediate goods, expecting production growth to continue. Manufacturing price pressures have lessened as input costs fall, driven by lower raw material prices and reduced demand. This has led to lower output prices. Employment conditions in May remained stable, with a slight improvement due to increasing optimism and backlogs. Many companies are hopeful about the economy, buoyed by the European Central Bank’s monetary easing and Germany’s fiscal support, which could benefit the eurozone. However, U.S. trade policies introduce uncertainties that might affect global stability. In short, Spain’s manufacturing sector seems to be on the upswing. May’s data shows a rise in activity for the first time in months. The Purchasing Managers’ Index (PMI) has crossed the line between contraction and expansion at 50.5. This is not only better than expected but also a notable improvement over April’s figures for an industry that had been shrinking since January. Tracking the short-term changes reveals more than just vague hopes. Output and employment are up. While new orders are still falling, the decline is less steep. This suggests that the worst of the demand issues may be behind us. The uncertainty of foreign trade seems to be lessening, and Spain’s limited trade connections with the U.S. means it is less affected by U.S. policies than other European countries. Additionally, companies are building up their inventories of intermediate goods. This generally reflects a bet on increased future output, suggesting confidence in upcoming demand. It’s a proactive approach focused on meeting production targets rather than hoarding excess materials. Input prices are also falling, benefiting from cheaper raw materials and reduced global demand pressures. This drop is leading to lower selling prices, which suggests a more competitive pricing landscape ahead. Businesses might pass on cost savings due to necessity rather than choice. Employment is not stagnant either. Though changes are modest, the upward trend matters. It shows that companies are not just retaining staff but sometimes adding to their numbers, indicating more secure order pipelines. Backlogs are starting to form again, suggesting work is coming in more steadily than it did a few months ago. Business expectations are improving. Much of this optimism likely ties to expected rate cuts from the ECB, easing borrowing conditions across Europe. Additionally, supportive policies from Berlin seem to be providing external assistance. Together, these factors strengthen future projections and clarify demand models. However, risks remain. Changes in U.S. regulations could still pose a threat. Even if Spain is less exposed compared to others, global planning could still be shaken. Sectors relying on global supply chains or U.S.-denominated contracts may have to readjust delivery schedules or hedge more actively. As a result, we are keeping our risk models tight and paying closer attention to commodity flow data. Changes in prices and volumes may require recalibration, especially if broader eurozone momentum builds from this initial growth. While there are no guarantees, recent figures offer a more optimistic view than what we saw just a quarter ago.

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