Spain: Composite PMI jumps in final month of 2020 but remains weak amid a challenging demand environment
January 6, 2021
Reflecting a milder decline in services activity and a return to growth by the manufacturing sector, the IHS Markit composite Purchasing Managers’ Index (PMI) jumped from 41.7 in November to 48.7 in December. Nevertheless, the index remained below the 50-threshold, indicating a fall in business activity over the previous month.
The IHS Markit Services PMI leaped from 39.5 in November to 48.0 in the final month of 2020, indicating a much weaker contraction of service sector activity. New business fell again in December, though to a lesser degree than in the prior month, as Covid-19 restrictions continued to weigh on activity, primarily in the tourism and hospitality industries. Excess capacity and an uncertain outlook prompted firms to cut staffing levels yet again, though at the slowest rate since March. More positively, business confidence strengthened on optimism regarding future activity amid positive developments over Covid-19 vaccines.
Similarly, the IHS Markit Manufacturing PMI increased from 49.8 in November to 51.0 in December. Thus, the print pointed to a modest improvement in operating conditions in the manufacturing sector. That said, underlying dynamics remained challenging. Output rose only marginally as weak domestic demand outweighed a more favorable external backdrop for sales. Moreover, frail demand conditions, excess capacity and uncertainty over the near-term outlook led to another decline in employment. On a brighter note, sentiment among good-producers improved to its best since July 2018 on hopes that the pandemic will have passed by end-2021.
Author: Javier Colato, Economist