Spain: Composite PMI recovers from July's near three-year low in August
September 5, 2018
Reflecting slightly stronger activity growth in both the services and manufacturing sectors, the IHS Markit composite Purchasing Managers’ Index (PMI) edged up to 53.0 in August from 52.7 in July, which had marked the lowest print in over two and a half years. The index still lies above the 50-point threshold, indicating healthy expansion in business activity in the Spanish economy.
The IHS Markit services PMI remained broadly unchanged in August, inching up to 52.7 from 52.6 in July, which had marked the lowest reading since November 2013. Business activity continued to expand solidly in August, albeit at a much softer pace than seen early in the year, while new business growth eased to a 20-month low. Although the rate of job creation also weakened somewhat, it remained robust and was one of the fastest in over a decade. On the price front, input cost inflation remained elevated, mainly reflecting higher fuel prices. However, output inflation rose only at a modest pace, in an effort by firms to stimulate demand. Lastly, signs of cooling demand led business confidence to fall for the fourth consecutive month in August, reaching a five-year low.
Similarly, the IHS Markit manufacturing PMI ticked up to 53.0 in August from an 11-month low of 52.9 in July. Growth in both manufacturing output and new orders accelerated in August compared to July. The rise in new orders from abroad, however, eased to a two-year low. Firms continued to hire extra staff at a solid rate in August, remaining broadly unchanged from the previous month. Regarding prices, input costs rose sharply in August on the back of higher prices for raw materials, particularly fuel and wheat. Notably, despite the increased cost burdens, firms lowered output prices for the first time in nearly two years. Meanwhile, business confidence declined to an over five-year low in August, primarily due to concerns over future customer demand.
Author: Javier Colato, Economist