Spain: Composite PMI edges up in May
June 5, 2018
Largely reflecting an improvement of business conditions in the services sector, the IHS Markit composite Purchasing Managers’ Index (PMI) edged up from 55.4 in April to 55.9 in May. As a result, the index lies further above the 50-point threshold, indicating healthy expansion in business activity in the Spanish economy.
The IHS Markit services PMI rose from 55.6 in April to 56.4 in May, a three-month high. May’s pick-up in business activity reflected faster growth in new business and job creation. Stronger client demand buttressed the marked increase in new business, which led to an accumulation of backlogs of work following a slight fall in April. The solid expansion in business activity also led to a quicker pace of employment creation that was just shy of the 11-year high recorded in March. Regarding prices, input price inflation rose sharply in May on the back of higher fuel prices and labor costs. Consequently, businesses passed these higher costs on to consumers; however, output price inflation remained largely stable from April. Lastly, and despite recording the lowest level so far in 2018, business confidence among service providers remained strong in May.
Meanwhile, the IHS Markit manufacturing PMI fell from 54.4 in April to 53.4 in May, the lowest reading in nine months. May’s dip was driven by slower growth of output and new orders, with both expanding at the weakest pace in nine months. Nonetheless, output growth was still strong in May, and robust European demand helped firms secure higher new export orders. Due to higher output demand, purchasing activity and job creation rose at a faster clip in the month. On the price front, input costs rose notably, which reflected higher oil and metal prices. As a result, output price inflation increased at the swiftest pace in four months. Firms stayed optimistic in May, reporting expectations of additional new orders and increased operating capacity.
Author: Javier Colato, Economist