Spain: Composite PMI falls to five-and-a-half-year low in May
June 5, 2019
Largely reflecting slower activity growth in the manufacturing sector, the IHS Markit composite Purchasing Managers’ Index (PMI) declined to a five-and-a-half-year low of 52.1 in May from 52.9 in April. That said, the index remains above the 50-point threshold, indicating healthy expansion in business activity.
The IHS Markit Manufacturing PMI slid from 51.8 in April to 50.1 in May, indicating broad stagnation in the sector. May’s dip mainly reflected slight declines in new orders and employment. While production stagnated, new orders fell for the first time in three months, albeit mildly and largely due to weak demand domestically. Similarly, manufacturers reduced their staff levels, although they did so marginally and marked the first decline in employment since the end of 2013. Regarding prices, input cost inflation remained moderate while output charge inflation remained subdued. Finally, business confidence deteriorated noticeably amid the weakness seen in production and new orders.
Similarly, the IHS Markit Services PMI declined to 52.8 in May from 53.1 in April. Slower activity growth was weighed by a softer expansion of new business in May, which rose at the weakest pace in over five-and-a-half years. Political instability following the elections and faltering demand from abroad were reportedly behind the slowdown. Meanwhile, although companies continued to hire workers, they did so at the slowest rate since October. On the price front, input cost inflation rose notably yet again, reflecting higher labor costs and transportation prices. Service providers lifted output prices only slightly however, mainly due to competitive pressures. Lastly, business confidence improved somewhat in May amid improved prospects for political stability and market expansion ahead.
Author: Javier Colato, Economist