Spain: Composite PMI reaches six-month high in December
January 4, 2017
The Markit Purchasing Managers’ Index (PMI) Composite Output Index came in at 55.5 in December, slightly above November’s 55.2 figure and the highest reading since June. As a result, the index is now further above the 50-threshold that separates expansion from contraction in business conditions.
The Composite Index has gradually improved since September on the back of positive impulses from improving manufacturing conditions. In December, the Markit Spain Manufacturing PMI rose from November’s 54.5 to 55.3, the best result in eleven months. The increase stemmed from faster growth in manufacturing output and new orders, underpinned by reports of strengthening client demand. An increased workload weighed heavily on firms’ operating capacity, with backlogs of work expanding at the fastest rate in ten years. This, in turn, prompted companies to hire extra staff at a similar pace to that seen in November—a 16-month high. Inventories dwindled for a second month running, fueling heightened purchasing activity. On prices, Andrew Harker, Senior Economist at IHS Markit, comments, “The rate of cost inflation continued to strengthen, but firms were often able to raise their output prices in response. In fact, charges increased at the fastest pace in more than five-and-a-half years, suggesting that client demand is robust enough to withstand price rises.”
Meanwhile, the Markit Spain Services PMI eased timidly to 55.0 from November’s 55.1. Despite the slight decrease, the index ended 2016 on an upbeat note, with growth rates in activity and new business remaining broadly stable and employment levels rising at the fastest pace since July. Business sentiment, albeit slightly below November’s mark, was still robust, with firms expecting faster new order growth and expanding activity in 2017 on the back of an overall improvement in economic conditions. Regarding prices, input cost inflation accelerated to an over six-year high, with companies noting higher costs for fuel and energy. However, stronger demand allowed more firms to pass these costs onto clients, broadly matching the trend seen in the manufacturing index.
Author: David Ampudia, Economist