The HCOB Spain Manufacturing PMI fell further to 48.1 in April 2025, down from 49.5 in March and coming in below market expectations of 50.0. This marked the third consecutive month of contraction in the sector and the sharpest deterioration in factory activity since December 2023.
Spain factory sector downturn intensifies
The decline was driven primarily by a drop in output, which contracted for the first time since August 2024. The weakness in production reflected softening demand conditions both domestically and abroad, as manufacturers reported a notable loss in momentum following a relatively stable start to the year.
New orders fell for the third straight month, with the rate of decline accelerating to its steepest level since late 2023. Survey respondents cited rising market instability, persistent global economic uncertainty, and mounting concerns over tariffs—particularly in relation to transatlantic trade tensions—as key factors suppressing client appetite. Export sales also remained under pressure, hindered by reduced competitiveness and heightened uncertainty among key trade partners.
Employment remains steady
Despite deteriorating demand, employment across Spain’s manufacturing sector remained relatively steady. The employment index showed little change for the fourth consecutive month, suggesting that while hiring activity has slowed, firms are so far refraining from large-scale layoffs. This may reflect a strategic decision to retain skilled labor in anticipation of a longer-term rebound or a cautious approach to structural workforce adjustments amid fluctuating business conditions.
On the cost front, input prices recorded a modest increase in April, reflecting a slight rise in raw material and transportation costs. However, strong competitive pressures within the domestic and Eurozone markets continued to limit manufacturers’ pricing power. As a result, selling price inflation remained subdued, with many firms opting to absorb cost pressures rather than risk losing customers in a tight demand environment.
Business confidence weakened notably for the second consecutive month, with sentiment regarding future output falling to its lowest level since August 2024. Firms cited a combination of external uncertainties—including tariff policy ambiguity, weak external demand, and political instability in key export destinations—as reasons for their deteriorating outlook. This growing caution is likely to weigh on investment decisions and production planning in the near term.
