Spanish factory activity grows in July after long lockdown, car sales up

MADRID (Reuters) - Spanish factory activity expanded in July, rebounding from its worst slowdown in almost 12 years as the economy revived after the government ended one of Europe’s strictest coronavirus lockdowns a month earlier, a survey showed on Monday.

In another positive sign, new car registrations ticked up by 1.1% in July from a year ago, largely thanks to help-to-buy schemes, according to car makers’ association Anfac.

IHS Markit’s Purchasing Managers’ Index (PMI) of manufacturing companies rose to 53.5 in July from 49.0 in June, having dived to 30.8 in April when all non-essential economic activity in the country was halted by the lockdown.

Coronavirus restrictions were scrapped from June 21 as contagion rates and the number of coronavirus fatalities slowed, but it will take time before factories are running at their full capacity again, the survey showed.

Separately, Anfac said that over the past month 117,929 new cars were registered in Spain, up from 116,673 a year earlier.

Spain rolled out a $4.2 billion plan in June to encourage people to buy new cars, including financial incentives for scrapping an old vehicle in exchange for a newer, cleaner one.

Despite the improved industrial indicators, a full economic recovery remains a distant prospect.

“There remains some way to go until we see a return to levels of activity recorded before the COVID-19 pandemic intensified, with the latest survey again showing falling backlogs of work and cuts to employment,” Paul Smith, economics director at IHS Markit, said in a statement.

The Spanish economy contracted 18.5% in the second quarter, the widest margin on record and one of the deepest downturns in the region, as the pandemic took a heavy toll on the country.

Reporting by Inti Landauro and Nathan Allen; Editing by Hugh Lawson and Andrei Khalip