Spain: Composite PMI bounces back from multi-year low in October
November 6, 2018
Reflecting stronger activity growth in both the services and manufacturing sectors, the IHS Markit composite Purchasing Managers’ Index (PMI), bounced back from a multi-year low of 52.5 in September to 53.7 in October. The index lies above the 50-point threshold, indicating healthy expansion in business activity.
The IHS Markit services PMI rose from 52.5 in September to 54.0 in October. Stronger business activity in October reflected the faster growth of incoming new business. In line with greater demand, backlogs of work continued to mount, pointing to capacity being under pressure. Meanwhile, firms continued to take on extra staff in October, but they did so at the slowest pace in two years amid weakening confidence over heightened economic uncertainty. On the price front, operating costs continued to climb at a marked pace, owing to higher fuel and labor costs. Output prices rose only marginally, however, indicating that operating margins are facing some pressure. Lastly, business confidence was broadly unchanged from September’s five-year low, as increased political uncertainty, at home and abroad, clouded firms’ outlook.
Similarly, the IHS Markit Manufacturing PMI inched up from 51.4 in September to 51.8 in October, indicating a modest improvement in operating conditions. Faster expansions in output and new orders were mainly behind the increase. Firms’ operating capacity also came under pressure, as evidenced by the further rise in backlogs of work in October. Meanwhile, despite the deterioration in business confidence, owing to waning global demand and rising political uncertainties, the pace job creation by firms remained modest. Regarding prices, input cost inflation rose in October on the back of higher prices for foodstuffs and metals. Subsequently, firms passed these higher costs onto customers, with output price inflation climbing to a three-month high in the surveyed month.
Author: Javier Colato, Economist