Spain: Composite PMI rises to over one-year high in July
August 5, 2020
Reflecting a return to growth by the manufacturing sector and a slightly stronger expansion of services activity, the IHS Markit composite Purchasing Managers’ Index (PMI) climbed from 49.7 in June to 52.8 in July, the highest reading since April 2019. Consequently, the index crossed the 50-threshold, indicating growth in business activity over the previous month.
The IHS Markit Manufacturing PMI jumped from 49.0 in June to 53.5 in July, marking an over two-year high and pointing to an improvement in operating conditions for the first time since February. Both output and new orders returned to growth in the month as businesses continued to reopen amid easing of Covid-19 related restrictions, which in turn led to an upswing in demand. Concerningly, however, manufacturers continued to operate below capacity and thus cut jobs once again. Moreover, despite sentiment amongst goods-producers remaining positive for the second month in a row, it was subdued overall amid concerns over the reemergence of infections and protracted weakness in demand.
Similarly, the IHS Markit Services PMI increased from 50.2 in June to 51.9 in July, indicating an improvement in service sector activity. However, growth was modest as incoming new business remained virtually stagnant due to the pandemic. In addition, workforce numbers were reduced for the fifth month running despite some staff returning from furlough. On the price front, operating expenses rose again, though at a softer rate than in June, while firms offered discounts on output charges to retain customers and buoy sales. Lastly, business confidence remained positive, but below the historical trend amid elevated uncertainty with regard to the evolution of the pandemic and impact on activity.
Author: Javier Colato, Economist