Manufacturing activity in Spain expanded in February for the first time in almost a year as domestic demand picked up, a survey showed on Friday.

The HCOB Purchasing Managers' Index (PMI) for Spain's manufacturing sector, compiled by S&P Global, stood at 51.5 in February, up from 49.2 in January. It was the first reading above 50, which marks growth in activity, since March 2023.

Both output and new orders rose in February, mainly thanks to an increase in domestic demand as exports kept on falling but at a slower pace.

"Companies reported that sales had risen on the back of improved demand, and the latest figures marked a turnaround from the noticeable contractions seen in recent months," S&P said in its monthly report.

Disruptions to shipping in the Red Sea due to geopolitical tensions have caused supply chain disruptions which led to higher prices, according to companies surveyed, and may have an effect on inflation later, the report said.

The Spanish economy expanded by a faster than expected 0.6% in the fourth quarter of 2023 even with the weak manufacturing sector.

Spain's economy expanded 2.5% in 2023, outperforming its euro zone peers. Italy and France grew 0.7% and 0.9% respectively, while Germany contracted 0.3%.

The Spanish government expects economic growth to slow to a still solid 2% this year. (Reporting by Inti Landauro; Editing by Susan Fenton)