Spain: Composite PMI dips to multi-year low in September
October 3, 2018
Reflecting moderating activity growth in both the services and manufacturing sectors, the IHS Markit composite Purchasing Managers’ Index (PMI) slipped from 53.0 in August to 52.5 in September, a multi-year low. However, the index still lies above the 50-point threshold, indicating healthy expansion in business activity in the Spanish economy.
The IHS Markit services PMI inched down from 52.7 in August to 52.5 in September, bringing the third-quarter average to the lowest since Q4 2013. Business activity continued to expand solidly in September, albeit at a slightly softer pace than in August, while new orders growth eased to a 21-month low. Firms continued to take on extra staff in September but the rate that they did so moderated for the fourth consecutive month. On the price front, input costs continued to climb at a marked pace—reflecting higher prices for fuel, energy and labor—despite input inflation easing to a one-year low. However, output prices increased only mildly in September, as some service providers offered discounts to increase sales and maintain profit margins. Lastly, business confidence dropped for the fifth successive month in September and reached an over five-year low. Increased competition from rival tourist destinations was reportedly behind the dip in sentiment.
Similarly, the IHS Markit manufacturing PMI edged down from 53.0 in August to 51.4 in September, the lowest in over two years. Weaker expansions in output, new orders and job creation were behind the fall. Growth in production remained solid in September but was the slowest in two years. Similarly, new orders rose but the rate of expansion eased to an over two-year low. Due to softer growth of output requirements, manufacturers also moderated their rate of staff intake, rising at the weakest clip since August 2016. Regarding prices, input cost inflation inched up in September on the back of higher prices for raw materials, particularly fuel, oil and steel. Firms passed these higher costs onto customers, contrasting the decline in output prices in the previous month. Meanwhile, business confidence improved in September, largely reflecting the positive outlook over the continued growth of new orders.
Spain GDP Forecast
FocusEconomics Consensus Forecast panelists expect GDP to expand 2.7% in 2018, which is unchanged from last month’s forecast. Panelists expect the economy to grow 2.3% in 2019, which is unchanged from last month’s projection.
Author: Javier Colato, Economist