Spain's PMI marks its highest since May 2023, driven by services

MADRID, 5 Mar.

Spain's PMI marks its highest since May 2023, driven by services


Spain's private sector activity accelerated in February to its highest levels since May 2023, thanks to the boost in the services sector, as well as the recovery in manufacturing, as reflected by the Purchasing Managers' Index (PMI), whose composite data rose to 53.9 points from 51.5 the previous month.

In the case of the services sector, the PMI increased its reading in February to 54.7 points from 52.1 in January, its highest level since May 2023, while Spain's manufacturing PMI improved to 51.5 from 49.2 points, its best reading since March 2023.

The acceleration in services activity in February was closely linked to the increase in new orders, which was the sharpest in nine months, although the growth came largely from domestic sources, as export orders decreased in February for the seventh consecutive month.

Likewise, overall business confidence in the future strengthened markedly, reaching its highest level in two years amid hopes of improved demand and the launch of new projects to boost sales, which was reflected in hiring with another monthly increase in employment.

However, judging by the latest data, the increase in employment boosted average labor costs. In some cases, companies also cited difficulties in recruiting suitable staff, which increased upward pressure on wages.

Alongside these pressures, higher supplier price inflation in general was also seen, along with rising energy and transport costs, which meant that input costs generally increased by the same amount in February. strongest rate since May 2023, to which companies responded by raising their rates at the fastest pace in a year.

"Spain continues to advance on the path of growth," said Jonas Feldhusen, junior economist at Hamburg Commercial Bank, for whom the data anticipate "solid growth in the first quarter" and underline Spain's resilience.

However, the economist warns that this rebound also has its disadvantages, as demonstrated by the analysis of prices and information from some companies of increases in transportation and energy costs.

"The increase in energy prices may be related to the fact that the Government has ended the VAT reduction on electricity bills in January. In this environment, companies are trying to pass on the increase in costs to customers," he points out. Feldhusen, anticipating that inflation in Spain will persist in 2024.