Spain manufacturing PMI contracts again in July

MADRID (Reuters) - Spanish manufacturing activity shrank again in July after holding steady in June, a survey showed on Thursday, in a sign the country's long-awaited economic recovery may still be some way off.

Markit's Purchasing Managers' Index (PMI) of manufacturing companies stood at 49.8 in July, nudging down from 50.0 in June. Apart from June, the index has remained below the 50 line separating growth from contraction every month since April 2011.

"While new orders increased for the second month running, this wasn't yet enough to encourage firms to raise their output or employment in July," Markit economist Andrew Harker said.

"This seemingly reflected a lack of confidence among firms that the recent improvement in demand will be sustained, as well as the reliance on export markets for growth."

Spain's economy shrank for the eighth straight quarter from April to June, preliminary data showed, although the contraction of 0.1 percent prompted the government to claim the recession was almost over. The manufacturing sector accounts for just over 12 percent of Spain's economy.

In view of the continuing weakness in domestic demand amid massive unemployment, which hit 26.3 percent in the second quarter, many economists expect the economy to remain in a slump into next year.

The PMI unemployment index fell to 47.8 in July from 48.9 in June, Markit said, marking the 33rd straight month of job-shedding in manufacturing. Since August 2007, the index has only moved above the line separating contraction from growth once.

- Detailed PMI data are only available under license from Markit and customers need to apply to Markit for a license.

(Reporting by Paul Day; Editing by Hugh Lawson)