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Euro area Manufacturing PMI (Final, June): 47.6, Flash: 47.8, Previous: 47.7 Germany Manufacturing PMI (Final, June): 45.0, Flash: 4...

Spain: July Economic Outlook


Euro area Manufacturing PMI (Final, June): 47.6, Flash: 47.8, Previous: 47.7

Germany Manufacturing PMI (Final, June): 45.0, Flash: 45.4, Previous: 44.3
France Manufacturing PMI (Final, June): 51.9, Flash: 52.0, Previous: 50.6
Italy Manufacturing PMI (June): 48.4, GS: 49.1, Consensus: 48.7, Previous: 49.7
Spain Manufacturing PMI (June): 47.9, GS: 49.8, Consensus: 49.5, Previous: 50.1

Italian manufacturing PMI fell by 1.3pt to 48.4 in June, below market expectations. 


SPAIN
Spanish manufacturing PMI also fell considerably, slipping by 2.7pt to 47.9, well below expectations. This reflected notable weakness in new orders, output, and employment. The drag on the industrial sector was largely attributed to global trade tensions and political uncertainties.

Incoming data points to slightly weaker growth in the second quarter, on the heels of a strong Q1 upturn that was buoyed by a robust rebound in fixed investment. Although industrial production bounced back solidly in April, the composite PMI fell to a five-and-half-year low in May, weighed on by broadly stagnant manufacturing activity. Moreover, while retail sales remained firm in April, employment growth slowed in April and May, which, coupled with consumers turning more pessimistic over the same period, suggests that private consumption has lost some stride. In the political arena, after scoring important wins in the recent national, regional and local elections, acting Prime Minister Pedro Sánchez is set to be sworn in the investiture vote to take place next month. Falling short of a parliamentary majority, however, his Socialist Party (PSOE) is likely to rely on left-wing Unidas Podemos and smaller regional parties to govern.
INDUSTRIAL PRODUCTION
Industrial production rose 1.7% year-on-year in seasonally- and calendar adjusted terms in April, rebounding from March’s revised 3.0% contraction
(previously reported: -3.1% year-on-year). Despite the upturn, the annual
average variation in industrial output remained at minus 0.3% in April, which
had turned negative for the first time in five years in March.
April’s increase reflected improved dynamics in most major sectors. The
production of consumer goods rebounded strongly, while capital and
intermediate goods production picked up compared to March. Meanwhile,
energy output contracted for the third month running in April.
On a month-on-month basis, adjusted for seasonal and calendar effects,
factory output climbed 1.8% in April, rebounding from the 1.2% slip logged
in March.

REAL SECTOR
The Spanish Board of Architects approved 9,405 new construction permits in March, according to data published by the Ministry of Public Works. The figure was above both the 8,461 permits granted in March 2018 and the 9,175 permits granted in February. On an annual basis, permits rose 11.2% in March, slightly above February’s 10.5% upturn. The moving three-month sum of permits totaled 27,886 in March, which represented an 18.9% increase from the same period last year and followed the 23.6% expansion recorded in February. That said, the current number of permits represents a mere fraction of the 268,266 permits that were granted during the July–September 2006 peak.

RETAIL SALES
Retail sales rose 2.0% in year-on-year terms in April, marking a six-month high and following the soft 0.2% upturn logged in March. The print largely reflected a strong increase in food sales more than offsetting lower sales of personal equipment goods. On a distribution-based system, sales at small and large chain stores picked up notably compared to March while they rebounded at department stores. Meanwhile, purchases at single retail sales contracted for the second consecutive month in April.

EXTERNAL SECTOR
Spain’s current account balance recorded a tiny surplus of EUR 26 million
in March, smaller than the EUR 389 million surplus recorded in March 2018
but much greater than the EUR 2.8 billion deficit logged in February. In the
12 months up to March 2019, the current account balance reached a surplus
of EUR 9.0 billion, the smallest since October 2014 and below the EUR 9.4
billion recorded in the 12 months up to February.
According to the Bank of Spain, the lower current account surplus compared
to the previous year reflected the smaller trade surplus recorded in March
2019 of EUR 1.2 billion—mainly the result of imports growing more than
exports—below the EUR 1.8 billion logged in March 2018.
Thank you Goldman Sachs and Focus Economics