Spain: Composite PMI eases in January, operating conditions across Spanish businesses still solid
February 3, 2017
The Markit Purchasing Managers’ Index (PMI) Composite Output Index came in at 54.7 in January, slightly below December’s 55.5, which had marked a six-month high. Despite the decrease, the index remains well above the 50-threshold that separates expansion from contraction in business conditions.
Although the Composite Output Index edged down in January, operating conditions among Spanish manufacturers saw another month of improvement. The Markit Spain Manufacturing PMI started the year with a bang and rose from December’s 55.3 to 55.6, the best result since May 2015. New orders and output continued to grow robustly, underpinned by both stronger domestic and external demand. Higher activity prompted firms to hire additional workers, with the pace of job creation being the fastest since 1998. Andrew Harker, Senior Economist at IHS Markit says, “this suggests that companies are becoming more and more confident in the sustainability of the current upturn in new business, something that was also evident from the newly released future output index for the survey which jumped to a two-year high.” Notwithstanding higher staffing levels, the surge in demand meant that backlogs of work continued to mount. Regarding prices, higher costs of fuel, energy and steel, among other raw materials, caused the rate of input cost inflation to increase at the fastest pace since April 2011. Firms managed to pass most of the additional costs onto clients. Client demand is proving robust enough to withstand these price rises.
Meanwhile, the Markit Spain Services PMI dipped to 54.2 in January from December’s 55.0. The slight decrease stemmed from the slowest pace of expansion in services output since July 2016. However, business conditions among Spanish services providers are still sound enough, with strong demand and upbeat confidence highlighting the current strength of the sector. The pace of new orders accelerated in January to a four-month high. Nonetheless, high staffing levels meant that companies were largely able to work through their outstanding business. Resilient client demand also meant that firms were capable of substantially increasing their output prices in a bid to offset soaring input costs, which rose at the fastest pace since March 2011. Confidence among services providers also rose to a nine-month high, buttressed by widespread optimism regarding the near-term outlook of the Spanish services market.
Author: David Ampudia, Economist