Spain: Composite PMI at highest level since end 2006 as manufacturing and services activity gain steam amid easing restrictions
June 6, 2021
The IHS Markit composite Purchasing Managers’ Index (PMI) jumped to a historic high of 59.2 in May from 55.2 in April, reflecting stronger growth in both the manufacturing and the services sector. Consequently, the index moved further above the 50-threshold, indicating a marked increase in business activity over the previous month.
The IHS Markit Manufacturing PMI climbed from 57.7 in April to 59.4 in May, indicating a stronger improvement in operating conditions in the manufacturing sector. Sharper increases in new orders, output and employment underpinned May’s uplift, which benefited from robust domestic and foreign demand, particularly from neighboring European countries. That said, the combination of supply shortages and robust demand translated into severe delays in delivery and the highest pace of cost inflation on record, which in turn resulted in the sharpest increase in output charges since data collection began back in mid-2002.
Meanwhile, the IHS Markit Services PMI surged to 59.4 in May from 54.6 in April, signaling rising demand and business volumes amid easing restrictions and the vaccines rollout. New business was supported mainly by the domestic market, while export sales expanded for the first time in over two years. Moreover, firms took on additional staff at the sharpest pace in over two years. On the inflation front, input cost inflation continued to build, amid higher prices for utilities, fuel and personnel. Therefore, companies hiked output prices but only to a limited extent as pricing power remained limited. Confidence softened slightly but remained strong overall, as firms anticipated strong demand on the back of the vaccination campaign and the reopening of the economy.
Commenting on the Manufacturing PMI, Paul Smith, economics director at IHS Markit, said:
“Production growth would likely have been higher if it were not for capacity constraints and ongoing difficulties in sourcing a wide range of inputs such as plastics, metals and timber. “Whilst it is hoped – and expected – that these supply-side challenges will eventually abate, such shortages are inevitably leading to acute inflationary pressures. And with companies buoyed by the relative strengthening of their own pricing power in recent months, factory gate prices are also rising at an unprecedented rate.”
Meanwhile, commenting on the Services PMI, Smith stated:
“The data highlight how the sector is primed for rapid growth in the coming months, with clients and consumers clearly keen to get back to some form of normality following the considerable challenges related to the pandemic over the past year or so.”