Alicante’s industry is showing a marked strain as inflation pressures, rising interest rates, and a slowdown in activity ripple through. The provincial economy is cooling as consumption in Europe tightens. Calculations from the Alicante Chamber of Commerce Studies Office show factory production in the province down 5.9 percentage points this year, a drop far steeper than the national contraction of 0.9 percent and also exceeding the regional decline of 3.2 percent from January to September.
Employment follows this trend. The downturn in sales has translated into job losses, with 1,086 positions lost in the past year from October 2022 to October 2023. The province now employs 90,861 people in the sector, a 1.2 percent decrease. This contrasts with gains of around 4 percent in construction and services, where the labor market remains resilient.
The chamber notes that the larger decline in Alicante’s industry comes with a profile of high specialization in consumer manufacturing. Intermediate industrial products and consumer goods such as shoes, textiles, toys, and furniture recorded the steepest falls on a global scale. These segments account for about 35 percent of total factory production in the region, underscoring their sensitivity to shifts in consumer demand [Citation: Alicante Chamber of Commerce Studies Office].
Development in the industrial production index is a key indicator of overall activity. Information and analysis from the chamber highlight the pattern of decline across manufacturing, with plastics or paper and cardboard suppliers most affected. Electrical, computer, and optical equipment manufacturing remains a bright spot, but its smaller share limits its ability to offset broader declines [Citation: Alicante Chamber of Commerce Studies Office].
Supply
The report notes a strong rebound in 2022, when Social Security membership rose by nearly 10 percent as the pandemic ended. Yet the year that followed shows a different trajectory: the supply chain is tightening as producers secure inputs but face weaker demand. Raw material imports by Alicante factories fell by as much as 20 percent in the year’s third quarter, while purchases of semi-manufactured components and packaging dropped by about 60 percent. The decline in orders and rising finished-stock levels have shaken business confidence [Citation: Alicante Chamber of Commerce Studies Office].
Low sales, coupled with a softening in energy and raw material prices, began to show up in prices. The consumer price index for the third quarter shows a year-over-year decline of 6.1 percent, with energy prices contributing to a more modest 1.4 percent fall when energy prices are discounted [Citation: Alicante Chamber of Commerce Studies Office].
In this environment, the industry remains highly sensitive to financing costs. The cost of bank credit and higher interest rates to curb inflation weigh on investment decisions, particularly in a country where access to capital tightens as monetary conditions tighten [Citation: Alicante Chamber of Commerce Studies Office].
Another important factor is demand from foreign markets. The slowdown in key eurozone economies has eroded external demand. While Alicante’s industrial exports grew by 15 percent in the first quarter, total exports for the first nine months of the year recorded a decline of about 1.4 percent, with a turnover around 4.226 million euros [Citation: Alicante Chamber of Commerce Studies Office].
Perspectives
Looking ahead to next year, the report expects a gradual improvement in international demand as major European economies regain footing and inflation pressures ease. IMF forecasts cited by the study indicate the euro area could grow from 0.7 percent in 2023 to around 1.2 percent in 2024, suggesting a slow but positive recovery path for the province’s industry [Citation: Alicante Chamber of Commerce Studies Office].
From a sectoral perspective, export prospects remain tied to the main markets and to the products most often exported. Intermediate products like metals manufacturing, marble and stone, chemical products, paper and rubber manufacturing, automotive components, and certain consumer goods such as textiles and furniture are expected to fare better than footwear, leather, and leather goods, which may face stronger headwinds in sales [Citation: Alicante Chamber of Commerce Studies Office].
Export prospects for machinery manufacturing, other capital goods, food and beverages, and non-metallic mineral products for construction are slightly less favorable in the near term, reflecting a cautious outlook for several segments within the Valencian Community’s industrial landscape.
Footwear and some consumer goods remain a variable, with footwear facing notable declines as demand softens. The overall picture shows a regional economy that depends on external markets and on maintaining competitive input costs while navigating higher financing costs and slower consumer demand. The chapter the chamber presents helps frame policy and business decisions within this evolving environment.
In summary, Alicante’s industrial sector is undergoing a transition driven by global inflation, tighter financing conditions, and a softer external demand. The path forward will hinge on a measured recovery in Europe, continued efficiency gains, and steady, diversified export activity that can cushion against fluctuations in any single sector.