Spain: Composite PMI dips to near three-year low in July
August 3, 2018
Reflecting cooling activity growth in both the services and manufacturing sectors, the IHS Markit composite Purchasing Managers’ Index (PMI) dipped from 54.8 in June to 52.7 in July, the lowest print in over two and a half years. 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 dropped from 55.4 in June to 52.6 in July, the lowest reading since November 2013. July’s decline largely reflected a slowdown in output growth amid weaker new business growth, which eased to a 19-month low. Despite softening business activity, however, the rate of job creation rose sharply in July. On the price front, input cost inflation remained elevated and eased only slightly from June’s near 10-year high, reflecting rising fuel and labor costs. In a bid to maintain profitability, companies passed these higher input costs onto consumers; nevertheless, output inflation remained moderate in July. Lastly, signs of cooling demand led business confidence to slip to a near five-year low.
Similarly, the IHS Markit manufacturing PMI slid from 53.4 in June to 52.9 in July, an 11-month low. The monthly dip reflected a softer expansion in new orders, job creation and purchasing activity more than offsetting faster output growth compared to June. New orders rose at the slowest rate in nearly a year amid signs of cooling demand while employment growth eased to a three-month low. Regarding prices, input costs rose at the swiftest pace since February, reflecting higher aluminium prices. As a result, output price inflation rose steeply in July, albeit more moderately than in June. Meanwhile, business confidence was steady from June’s six-month low, but remains strong nonetheless.
Author: Javier Colato, Economist