Spanish Manufacturing Breaks Yet Another Record In November

Operating conditions in the Spanish manufacturing sector is deteriorated sharply again in November,and the seasonally adjusted Markit Purchasing Managers' Index dropped to 29.4 in November from 34.6 in October. It isn't simply a question of the fact that Spanish industry has now been contracting since December of last year, the pace of contraction also continues to accelerate, and the Spanish November reading marked a manufacturing survey-record pace of deterioration for the third consecutive.

On such surveys a reading above 50 indicates expansion in the sector, while below 50 suggests contraction.

Economist at Markit Economics, Andrew Harker said, "As Christmas approaches, those in the Spanish manufacturing sector will find nothing to celebrate in the latest PMI data. The marked input cost deflation will make it easier for firms to discount prices, which they will need to do given the dramatic falls in new business."

New orders also declined at a series record rate due to the lack of demand caused by the recession in the wider Spanish economy. On the other hand, input cost inflation dropped significantly in November, after rising for thirty-nine months in a row. The decline was mainly due to a fall in the cost of raw materials, and particularly a fall in the cost of steel.


Sacyr Sells Itinere

Spanish builder Sacyr Vallehermoso also announced today and agreement to sell their highway operating unit Itínere Infraestructuras, S.A to a Citigroup Inc. for 2.87 billion euros in cash, plus Citgroup will accept 5.01 billion euros in debt. Itinere operates highway concessions in Brazil, Chile, Spain, Portugal and is currently constructing highways in Chile, Costa Rica, Spain, Ireland and Portugal.


The deal has a total value of 7.89 billion euros, and will obviously ease the immediate pressure on Sacyr to sell its 20% stake in Repsol YPF.

Sacyr, which is Spain's fifth-largest construction company, indicated that the transaction is expected to reduce its debt by 37% to 12.48 billion euros from 19.73 billion euros as of January 1, 2008. The deal will obviously take some of the immediate pressure off them, but since their Repsol stake is also accompanied by debt, and their liquidity providing requirements on the debt are set to rise in late December, then they still need to get out from under the Repsol stake at some point, so my guess is that they will still need to sell.