Floods Impede Spanish Manufacturing Growth, PMI Slips in November

Floods have significantly impacted the Spanish manufacturing sector, as evidenced by the November PMI report. The HCOB Spain Manufacturing Purchasing Managers' Index (PMI) fell to 53.1 in November, down from 54.5 in October. The decline was attributed to the deadly floods that struck the country, particularly in the Valencia region. The severe floods, which were the deadliest in Spain's modern history, caused at least 219 deaths and billions of euros in damages.

The floods had a significant impact on the manufacturing sector, with output, new orders, and employment all rising at a slower pace in November. Despite the setback, the sector remains in expansion territory, with the PMI still above the 50.0 threshold. However, the floods have led to supply chain disruptions and input delivery time worsening, as panellists attributed this to the regional floods. Input prices have also ticked up, mainly due to the rising cost of raw materials, although higher input prices have not resulted in enhanced prices charged by manufacturers.

The Investment Goods sector was particularly affected by the floods, with a high five-digit number of cars destroyed. This has led to increased demand for new cars through insurance claims, but has also disrupted production and supply chains. The floods have also affected Spain's trade balance, with new export orders growing at the slowest pace since May 2021.



The Spanish government has responded to the floods by approving a 10.6 billion-euro relief package for families, businesses, and town halls affected by the floods. Measures include repairing infrastructure, compensating victims, and supporting economic recovery. Long-term mitigation strategies should focus on improving urban planning, enhancing flood defense systems, and investing in climate resilience.



Despite the short-term impact of the floods, the Spanish manufacturing sector remains resilient. The PMI has shown a capacity to bounce back from previous challenges, and the sector is expected to continue its expansion in the long run. However, investors should closely monitor the situation and be prepared for potential disruptions in supply chains and input prices.

In conclusion, the recent floods in Spain have slowed manufacturing growth in November, as evidenced by the PMI slipping to 53.1. The floods have led to supply chain disruptions, increased input costs, and a slowdown in exports. The Spanish government has responded with a relief package, but long-term mitigation strategies are needed to prevent future disruptions. Despite the setback, the manufacturing sector remains resilient and is expected to continue its expansion in the long run.