Spain: Composite PMI falls further into contractionary terrain in January amid Covid-19 woes, weak demand and adverse weather conditions
February 3, 2021
Reflecting a sharp decline in services activity and a swing back to contraction by the manufacturing sector, the IHS Markit composite Purchasing Managers’ Index (PMI) dropped to 43.2 in January from 48.7 in December 2020. Thus, the index slipped further below the 50-threshold, indicating a steeper fall in business activity over the previous month.
The IHS Markit Services PMI declined from 48.0 in December to 41.7 in January, indicating a more significant contraction of service sector activity. The continuation of Covid-19 related restrictions coupled with heavy snowstorms during the month led to the seventh consecutive month of shrinking new business, which was more pronounced than in December. Due to weak demand conditions and lack of new work, firms cut staffing levels yet again, though at the softest rate since March 2020. Business confidence, meanwhile, weakened slightly amid worries over the longer-term impact of the pandemic.
Similarly, the IHS Markit Manufacturing PMI slid from 51.0 in December to 49.3 in January. Thus, the print pointed to a slight deterioration in operating conditions in the manufacturing sector. Output contracted mildly and new work declined at the sharpest pace since May 2020 in January, weighed down by pandemic-associated restrictions, storm Filomena and a frail demand environment. Furthermore, manufacturers cut employment for the third month running and at a marked rate. More positively, despite a challenging short-term outlook, goods-producers remained generally optimistic over activity ahead amid the vaccine rollout and leaving the worst of the pandemic behind.
Author: Javier Colato, Economist