Prior 50.0Spain's manufacturing sector activity falls back into contraction territory as the Middle East conflict starts to have an impact. The heightened uncertainty raised by the conflict and higher energy prices are feeding into supply-chain disruptions as well as rapidly rising prices for fuel and inputs. And that is resulting in manufacturers reporting accelerateddeclines in output and new orders.Besides that, employment conditions also declined with the outlook also taking a hit amid a steep deterioration in manufacturing sector confidence.Of note, input price inflation accelerated sharply to its highest level since late 2022. Expect this trend to also show up across the whole region with regards to the PMI readings today. In turn, that will keep the ECB guarded amid fears of inflation spiking higher in the months ahead. For now, headline inflation is the one being impacted but it could very well spill over to core prices down the road.HCOB notes that:“Spain’s manufacturing economy returned to contractionterritory during March as the Middle East war put payto any hopes in February of a short-term improvementin performance. Output and new orders both fell, whilstconfidence collapsed in the face of hostilities in theMiddle East with firms extremely worried about theprospect of a prolonged global economic slump in theface of an energy-induced surge in inflation.“Much of the outlook remains dependent on how theconflict now unfolds. A quick resolution would likely onlymean a temporary setback for sector performance, butfor the moment, business conditions have deterioratednoticeably. Alongside the slump in confidence, input costinflation has accelerated rapidly and now stands at itshighest level since late 2022. Not surprisingly, supplychain disruption is also widespread, with input deliverytimes lengthening markedly. And firms are somewhatunderstandably responding to heightened uncertaintyand falling order books by cutting jobs and loweringpurchasing activity accordingly.” This article was written by Justin Low at investinglive.com.