Spain: Composite PMI falls back to contractionary terrain in August on weak services activity
September 3, 2020
Reflecting a stagnating manufacturing sector and a swing to contraction of services activity, the IHS Markit composite Purchasing Managers’ Index (PMI) dropped to 48.4 in August from 52.8 in July, which had marked the highest reading since April 2019. Consequently, the index fell back below the 50-threshold, indicating declining business activity over the previous month.
The IHS Markit Services PMI slumped from 51.9 in July to 47.7 in August, indicating a contraction in service sector activity after two consecutive months of expansion. Declining new business and softening confidence were primarily behind the downturn. New work dropped at the fastest pace in three months, weighed on by Covid-19 outbreaks which have dampened tourist activity. In addition, workforce numbers were reduced again at a steep rate, and business confidence sank to a three-month low amid increased worries over the evolution of the pandemic and its impact on activity.
Similarly, the IHS Markit Manufacturing PMI declined to 49.9 in August from 53.5 in July, which had signaled a return to growth following the Covid-19 related slump in the previous months. As a result, August’s print pointed to broadly steady operating conditions in the sector. Although output rose again in line with the easing of containment measures, the expansion softened from July, while new orders remained largely unchanged as the pandemic continued to weigh on demand. Moreover, manufacturers cut jobs again, with the current streak of falling employment going for 16 months. More positively, sentiment among goods-producers increased to a six-month high amid hopes of improving demand.
Author: Javier Colato, Economist