Why this is important to Wisconsin businesses: The sector is already heavily reliant on U.S. imports, with demand expected to grow further.
With a share of one-fifth of Spain’s total merchandise exports, the capital goods industry (machinery, electrical and transportation equipment) is the country’s most important export industry. At the same time, Spain is a major importer of machinery components and parts. In 2015, Spain bought goods from abroad for $312 billion, and 10 percent of this amount, $30 billion, went toward machinery purchases.
Due to strong economic growth in 2015 (GDP growth of 3.2 percent) and improved access to credit for firms and households by stabilization of the Spanish banking sector due to funds from the European Stability Mechanism and ample access to liquidity and greater solvency, a new equipment investment boom has begun. This has led to increased imports of general industrial machines and equipment, metalworking machines and specialized machinery. Imports of these goods grew by 16 percent in 2015, amounting to $17 billion. The increase in purchases of machinery from the U.S. was even larger—over 31 percent—in the same period. With a 3.6 percent share ($1.1 billion) of total machinery imports, the U.S. was a major machinery source for Spain.
With more than two-thirds of the imported value, industrial machines and parts for different purposes dominated in last year’s statistics. Special machines, such as textile and leather, agricultural and paper machinery represented one-third of all machine imports. Important machine customers are export-oriented sectors such as the motor vehicle, food processing, chemicals and pharmaceuticals, leather and timber industries, as well as metal production and processing. In addition, the machine engineering sector itself is a major buyer. The U.S. served these branches by exporting corresponding machines. In 2015, the value of food processing machines exported to Spain was, at $37 million, double the 2014 value. The import amount of excavating machinery increased from $13.5 million to $25 million, and miscellaneous industrial machines (not further specified) from $192 million to $200 million. Purchases of motor vehicle parts grew from $253 million in 2014 to about $380 million.
In 2016 and 2017, the Spanish equipment investment forecast may weaken slightly according to the European Commission, but is predicted to remain very robust, with increases of 6 percent. Gross fixed capital formation, including investments in real estate, other construction and machinery, is expected to be around $215 billion in 2016. In particular, wood, non-metallics, fabricated metals and related machinery are expected to benefit from robust construction activity. Prospects for further intensification of trade in Spain are positive in the spring of 2016. In January, 16 financial institutions represented by the Spanish economy research institute Funcas forecast the Spanish GDP to grow by 3.2 percent in 2016. For 2017, an increase of 2.5 percent is predicted, driven by domestic demand. Private consumption is expected to remain the main driver of growth throughout the forecast horizon, supported by low inflation and steadily improving labor market conditions.
For Wisconsin machinery producers, the Spanish market provides thus substantial export opportunities, currently and in the mid-term future.