Spanish industry: PMI on the rise as output stalls

Industrial PMI smiles while output has been flat for five years

Is Spanish industry doing well? It depends on which indicator you look at, and that is where the trouble starts. The manufacturing PMI ended 2024 with an average of 52 points, above the 50 threshold that separates expansion from contraction, and with October nailed at 54.5. That is the picture used to sell the idea that Spain is decoupling from a Germany and France that are bleeding out. The other picture, that of industrial GDP, says something less epic: stagnation in real terms for five years and a contribution to the economy as a whole that keeps shrinking.

What does the manufacturing PMI actually measure?

The index is built from five weighted components: new orders (30%), production (25%), employment (20%), suppliers' delivery times (15%) and stocks of purchases (10%). Purchasing managers are asked whether they think things will get better, stay the same or get worse than the previous month. It does not measure what comes out of the factory. It measures what its managers expect to come out.

That is why the 2024 series paints a sector in moderate expansion: 49.2 in January, 51.5 in February, 51.3 in March, 52.2 in April, 54.0 in May, 54.5 in June, 51.0 in July, 50.5 in August, 53.0 in September, 54.5 in October and 53.1 in November. The fine print is in the comparison: 2023 moved around 48, in contraction territory, so the jump in 2024 is a recovery, not a take-off. And some warn of another detail: in a comparative survey, the index rising here only certifies that Spanish companies are less pessimistic than German ones, not that they produce more than them.

The awkward data: industrial GDP has been flat for five years

Real production does not match the survey. In nominal terms, industry's contribution to GDP has fallen from 16.3% in 2014 to 15.0% in 2023. Adjusted for inflation, industrial value added has not moved for five years. Another figure in circulation: the sector now contributes 14% of GDP, far below its weight in previous decades, and the deluge of European funds has not changed the trend.

That is the crux of the matter. The expectations indicator rises; the indicator of what is actually manufactured does not. When someone asks what industrial jobs have been created in recent years, the official data's answer is not a brilliant headline. And industry is precisely the sector that gives stability to an economy because it does not depend on the holiday season.

Stellantis, Ford and the factories that are shutting down

The closure or the cutback is not a barroom rumor. Stellantis Madrid is losing production of the future C4 and is looking for projects so as not to shut the plant entirely from 2028. Ford is cutting its production at Almussafes by 45% in a year to forget. And it is not just automotive: a Catalan valve company for the chemical sector has started moving production to Bulgaria, leaving the offices in Barcelona. The argument they use is not wages; it is the cost of energy plus freight.

The pattern is familiar and more irritating than it seems. Much of Spain's industrial fabric is not homegrown factories but subsidiaries of foreign multinationals surrounded by auxiliary SMEs. When one decides to tighten the screws, it drags down the whole chain. Some recall that car plants that stay usually do so in exchange for notable amounts of public money, and that the closure of just one of them is a catastrophe for the region and for the government of the day.

The factor that explains almost everything: the energy bill

Spanish industry pays 193% more for electricity than French industry. That differential is what sustains the narrative of a sound energy policy —the Iberian exception, the gas cap— that was once dismissed with contempt and is now held up as the reason Spain is not in Germany's situation. The German argument is textbook: cheap Russian gas is over, and with it the advantage that BASF or Volkswagen enjoyed for two decades. That is the bulk of Europe's malaise.

But the same energy bill is used to criticize the government itself. A 21% VAT on electricity is, they say, incompatible with promoting electrification of the economy: you cannot encourage everyone to plug in while taxing every kilowatt as if it were a vice. Between the optimism of relative cost and the pessimism of absolute cost, industry cannot quite decide what to think of the country it is in.

What you see in the workshop and never makes it into the survey

In Aragon, the restructuring has a face. Stellantis produces less and the Chinese card, CATL's battery factory, is viewed with the hope and distrust of someone who does not control the calendar. The rest of the sector keeps closing expensive, medium-productivity companies, with salaries that barely exceed 28,000 euros for average employees. Agro-industrial development —silos, conveyor belts, boilermaking, basic automation— is enjoying a real boom, but one of medium value added: assemblers, welders and project engineers who rarely go above 32,000 or 35,000 gross.

And then there is the small farm, the one that scrapes by while the big player integrates breeding, slaughter, processing and packaging for the supermarket. It is the portrait repeated in the real industrial Spain: plenty of activity, thin margins and a technological base that, outside the military sector and the Basque conglomerate, remains fragile. The exception that proves the rule: someone who was on vacation and got called in for two days of overtime because they were badly needed. An indicator as valid as any survey.

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With the PMI at 52, output flat and factories that still hold on almost always with public money involved, the question is not whether Spanish industry is doing well. It is who benefits from the answer depending on which chart you look at. And that, unfortunately, is not measured by any survey.