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Spain Dec manufacturing PMI rises on export surge

Source: Reuters - Mon 3rd Jan 2011

Spain's manufacturing sector ended the year on a slightly positive note, bolstered by the strongest monthly rise in foreign orders for over a decade in December even if domestic demand remained fragile, a key survey showed on Monday.

Markit's purchasing managers' survey for manufacturing rose to 51.5 in December from 50.0 in November, its highest level since July and moving above the 50 mark separating growth from contraction.

The news will be welcomed as a sign that manufacturing continues to provide a light for the Spanish economy, which is still recovering from a harsh recession and left close to one in five people out of work.

The survey was boosted by a strong rise in the output index, which leaped to 53.5 from 49.1, its highest level since August, while the export orders index leaped above a ten-year high hit last month.

"The sharpest monthly rise in new export orders for over a decade is a welcome note to end the year, as it appears that Spanish manufacturing firms are beginning to benefit from the global economic recovery," said Andrew Harker, economist at data provider Markit. However, he said the fact that new business rose only slightly pointed to weak domestic demand.

The data showed that manufacturers were still being hurt by high costs, and the input prices index rose on the back of rising energy costs to its highest level since April. The output price index held at much lower levels, suggesting manufacturers were having to cut costs to drum up demand.

Spain's economy exited an 18-month long recession at the beginning of last year, but growth rates remained weak, and was stagnant in the third quarter of the year.

The survey also showed that employment prospects in the sector remain poor, with the sub-index of employment holding below 50.

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