Spain's factory activity contracted in November for the fifth consecutive month amid high inflation and businesses' weakening confidence about the future.

S&P Global's Purchasing Managers' Index (PMI) for manufacturing edged up to 45.7 in November from 44.7 the month before. This represents the lowest reading since May 2020 and is still far below the 50-mark separating growth from contraction.

"Against the backdrop of elevated inflation, rising interest rates and geo-political uncertainties, the Spanish manufacturing economy continued to suffer in the face of sharply falling levels of output and new orders during November," stated S&P Global's economist Paul Smith.

Business sentiment in Spain stayed at a record low, S&P Global added. The business managers surveyed cited elevated economic uncertainty, market instability and a lack of new orders, Reuters reports.

Nevertheless, Smith said softer cost inflation fuelled hopes a recession within the sector may not be as severe or long-lasting as previously forecast.

That said, Spain's manufacturing sector lost jobs for the fifth consecutive month, which may turn out to be unwelcome news for the government, which is hoping the country can dodge a recession impacting several countries in Europe, thanks to the strength of the jobs market.

In addition, consumer prices in Spain in the year to October increased 6.8%, the slowest pace seen since January, the Reuters report goes on to add. Between July and September, economic growth suffered a steep slowdown to 0.2% compared to the previous three months, when GDP grew 1.5%.

Furthermore, consumer confidence in Spain rose to -28.7 in November from -31.6 in October, according to the Ministry of the Economy and Finance earlier this week. A faster-than-forecast fall in inflation and energy prices is leading to a degree of relief for consumers. 

"The Spanish inflation rate fell in November for the fourth month in a row and is now already four percentage points below its July peak level. The fall is likely to continue as price pressures higher up the production chain are starting to ease," ING reports.