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Spain’s manufacturing sector kept up its recent momentum in January, with growth accelerating to its highest level since May 2015, according to a closely-watched business survey.

January’s strong figure reflected continued rises in new orders among respondents, and the sharpest rise in reported new hires in more than 18 years.

Economists had predicted a slight slowdown, but IHS Markit’s purchasing managers’ index for the sector hit 55.6, from 55.3 in December.

The PMI surveys, which track measures like orders, hiring and inventories to try and form a rounded view on businesses’ health, are seen as useful early indicators of economic growth. A headline number above 50 indicates growth during the month.

The companies surveyed also reported big increases in both input costs and output prices, in a further sign of inflationary pressure in the economy. Official data released yesterday showed the country’s inflation rate at its highest level in more than four years.

Andrew Harker, IHS Markit senior economist, said:

The Spanish manufacturing sector posted a strong start to 2017, highlighted by one of the sharpest rises in employment in the survey’s 19-year history. This suggests that companies are becoming more and more confident in the sustainability of the current upturn in new business.

One potential headwind signalled by recent surveys is building inflationary pressures. Input costs rose at the fastest pace in almost six years as the rate of inflation quickened for the fifth month running. That said, more robust demand enabled firms to pass on higher costs to clients through increased output prices, something that they had struggled to do in previous years.

Copyright The Financial Times Limited 2017. All rights reserved.
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