Manufacturers in Spain and Italy are weathering the second wave of the coronavirus well and are reporting a continual improvement in activity last month, according to a widely respected business survey.
Spain auto industry
The IHS Markit flash manufacturing purchasing managers’ index (PMI) in both countries exceeded expectations, being bolstered by solid demand domestically and rising exports, the data showed.
In Italy, the index rose to 53.8 in October - a 31-month high - from 53.2 in September.
The Spanish index was up to 52.5, from 50.8 the previous month - a three month high.
An index reading of over 50 indicates that the majority of businesses showed an expansion in activity the previous month.
IHS Markit also revised its indices for France, Germany and the whole eurozone from initial readings made two weeks ago. Manufacturing in the eurozone overall hit a 27-month high of 54.8 in October, from 53.7 the previous month.
Unlike the lockdowns that were imposed during the first wave, many factories have been able to remain open despite renewed social restrictions aiming to slow the spread of the virus after companies implemented sanitary measures to protect workers.
Manufacturers in Italy reported steady growth in production on the back of an acceleration in new orders from customers both domestically and abroad.
“Improvements in foreign demand continued to provide a boost to the sector, as export order books expanded at the sharpest rate since early-2018,” Lewis Cooper, an economist at IHS Markit told FT.
There were, however, reports from factories in Italy that lead times - the length of time taken for the production process - were at their longest since May. IHS Markit put these delays down to increased demand for inputs, rising costs and logistical issues.
However, IHS did say that “the extent of the disruption was much less severe than at the height of the pandemic in the spring”.
“With Covid-19 cases on the rise and new restrictions being introduced, the recovery has the potential to stall if factories are unable to operate, or if client demand falls considerably as it did in the spring,” said Cooper.
Despite the new restrictions to contain a second wave of coronavirus infections being less strict, they are still expected to cause another downturn in the economy, which Rome is predicting will finish the year 9% smaller than last year.
The Italian economy bounced back from its pandemic-induced recession in the first half of this year — when factories, schools and non-essential shops were closed — with third-quarter growth of 16.1%.
Spanish manufacturers reported their fourth consecutive month of increasing production, with growth reaching its highest level since July. However, unlike Italy, the increase in orders was not strong enough to keep pace with production, leading to a build-up in inventories.
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