Italian manufacturing activity grew more than expected in January as its factories benefited from growing demand for exports to Asia, but Spain’s consumer-driven manufacturing sector fell back into decline, according to a survey of consumers. companies.
The IHS Markit Purchasing Managers Index for Italy’s manufacturing industry rose to 55.1 in January, from 52.8 in the previous month.
The figure was higher than the forecast of 52.4 by economists polled by Reuters, and marked the eighth consecutive month the reading has been above the 50 mark, indicating that a majority of companies reported improved conditions.
Production growth at Italian factories was the fastest in three months, with strong incoming orders and increasing employment.
In contrast, Spain’s IHS Markit manufacturing PMI fell to a seven-month low of 49.3, down from 51 at the end of last year and underperforming economists’ expectations.
The contrasting performance illustrates how the resilience of European manufacturing industry since the onset of the coronavirus crisis has benefited some countries more than others.
Chris Williamson, Chief Business Economist at IHS Markit, said: “After being pressed, business investment is coming back to life as the second half of this year is expected to see much higher demand levels. high as the economy recovers, which is why we see more exports of machinery and equipment to Asia. “
Machinery and equipment make up 13 percent of Italy’s manufacturing industry by value, compared to just 4 percent in Spain, according to Eurostat. “Italy is therefore more supported than Spain by the relatively strong Chinese economy,” said Steven Trypsteen, economist for Spain and Portugal at ING.
Spanish factories are focusing more on manufacturing consumer goods, which Williamson said were “still hit” by the fallout from the pandemic.
Spanish manufacturing output “fell slightly in January mainly due to the biggest reduction in new jobs since last May,” IHS Markit said. He added that export orders and employment were also down, as heavy snowstorms this month “weighed on both production and demand.”
Nikola Dacic, economist at Goldman Sachs, said that despite the weakening performance, “Spanish manufacturers remain optimistic about 12-month production levels, with only a moderate easing of the expectations index to a level similar to that of January 2019 ”.
Italy is the second largest manufacturing producer in the euro zone after Germany.
“At an early stage of the recovery like this, you would expect it to favor stronger exporters like Germany and Italy, because you see companies initially spending more on professional equipment,” Mr. Williamson said.
The manufacturing sector has helped Italy limit the economic damage caused by the COVID-19 restrictions; Italy’s unemployment edged up to 9 percent in December, but that figure is still below its pre-pandemic level.
The stronger-than-expected Italian reading and upward marginal revisions for France and Germany helped confirm that eurozone manufacturing output rose in January, recording a PMI of 54.8.
But Spanish and Italian manufacturers have reported rapid increases in freight costs and lengthening delivery times due to disruption of global supply chains, IHS Markit said.
While these pushed up input costs for manufacturers, they boosted PMI scores for both countries as longer delivery times are usually an indicator of busier factories.