Spanish services sector is expanding again shows PMI

IHS Markit’s Spanish services PMI posted a remarkable turnaround from May’s reading of 27.9 by reporting 50.2 for the month of June. Although only marginally above the no-change threshold of 50, this was well ahead of consensus expectations for a print of 45.9.

Driving today’s dramatic rise was a reported increase in new business volumes by Spanish businesses, although customer numbers were still far below pre-Covid 19 levels. Moreover, the absence of meaningful growth in new work meant firms were drawing down on inventories, which declined for a fourth month in a row.

Over the reporting period, many staff returned to work from furlough whilst input costs sharply rose following two straight months of decline. Supplier prices and transportation costs also rose with all of the aforementioned combining to significant increase operating expenses for Spanish businesses.

This has led to a renewed round of redundancies, as firms attempt to keep operating costs in check.

A weak business environment, combined with surging operating costs, meant companies were resorting to discounting in order to maintain work and attract new business, although firms were optimistic about the future with business confidence for the next twelve months reaching its highest level since February 2020.

Survey responses indicated that the majority of businesses believe continued loosening of lockdown restrictions will support growth in activity levels over the next twelve months.