In the aftermath of the pandemic, the regional economy battled to regain momentum but managed to steady turnover growth. Yet that momentum shows signs of strain. The Industrial Production Index (IPI) posted a year‑over‑year decline of 4.6%, pressured by softer consumer demand and a buildup of inventory across distribution channels. Exports too are navigating headwinds from inflation and rising borrowing costs.
New figures from the National Institute of Statistics indicate the IPI fell around 4.6% in June in the Community of Valencia and, similarly, in the Alicante province, a drop far steeper than the national average of 1.4%. The divergence reflects Alicante’s industrial structure, which is heavily weighted toward manufacturing and consumer goods that are currently weakening.
The IPI contracted in six autonomous communities while it rose in eleven others. The Canary Islands posted an 8% increase, Madrid 4.2%, and both La Rioja and Catalonia saw gains around 3.4%—whereas Murcia, Asturias, and Andalusia recorded the sharpest declines, at 13.2%, 9.1%, and 6.3% respectively. So far this year, Valencia’s industrial output has fallen by 1.6%, versus Spain’s overall decline of 0.2%. After June’s drop, annual rates turned negative following a modest May rise of 0.2%.
The sector experiencing the steepest drop in June was energy, down 9.5% year over year. Durable goods decreased by 3.3%, intermediate goods by 3.1%, while capital goods and non‑durable consumer goods rose by 4.6% and 1.7% respectively.
Seasonally and calendar adjusted, the industrial production index declined by 2.4 points in June compared with the same month the previous year and by 3% from May. Month‑to‑month, June’s production was down 1% from May, marking a slower pace than the prior month by about 1.5 points.
Tourism and food lift provincial CPI to 2.6% after a brief dip
The slowdown in activity stems from weaker consumption, a view shared by senior players in Alicante’s key industries. Marián Cano, president of the Valencian Footwear Entrepreneurs Association, explains a shifting pattern: people are prioritizing leisure and vacations this summer. Firms that did not receive orders last year are now facing demand that does not align with post‑pandemic market behavior. This assessment comes from the Valencian footwear sector and is echoed by statistics from the National Institute of Statistics.
The trend extends beyond Spain. Export markets are also showing strain. Cano notes Germany, a major destination for the local footwear industry, is in recession, with signals of weakness in the United States as well. The outlook remains cautious as inflation and higher interest rates persist, mortgage costs rise, and uncertainty about future fashion trends lingers. Statements from Alicante’s industrial associations underscore these pressures as the year progresses.
Business leaders in Alicante’s metal sector highlight higher financing costs, spikes in power prices, and persistent inflation as major pressures denting demand. They also point to lingering supply chain disruptions that produced an overhang of stock, a consequence of the pandemic’s impact on distribution networks. The resulting stock overhang is expected to require time to clear, adding another challenge for producers and retailers alike.
Meanwhile, leaders in the Valencia textile sector report a slowdown in activity over the most recent quarter, tied to softer consumer spending and ongoing household costs such as school fees and mortgage payments after the holidays. This picture lines up with broader macro signals about consumer resilience in the region.
Pink fever reshapes toys
Industry veterans observe a tougher global environment in both China and the United States. With more products being redirected into European markets, competition is intensifying across the toy sector. Observers note that while a major blockbuster film can briefly lift spirits, the longer‑term outlook remains cautious for toy manufacturers.
The director of the Spanish Association of Toy Manufacturers notes that consumer demand has cooled since the start of the year. Even as the Barbie movie’s success momentarily boosts sentiment, the overarching forecast for toy sales suggests a measured tempo ahead. The industry remains alert to shifting consumer tastes and the pressure of international competition, especially as producers adjust to higher material and logistics costs.