Spain: Composite PMI signals a near-stabilization of private sector activity in June
July 3, 2020
Reflecting a much weaker contraction of the manufacturing sector and a return to growth by the services sector, the IHS Markit composite Purchasing Managers’ Index (PMI) jumped to 49.7 in June from 29.2 in May. Despite the climb, the index remained marginally below the 50-threshold, indicating a mild retreat in business activity.
The IHS Markit Services PMI surged from 27.9 in May to 50.2 in June, indicating an improvement in service sector activity. However, growth was marginal as the Covid-19 pandemic continued to heavily constrain activity, despite the gradual lifting of lockdown measures and the wider reopening of the economy. Workforce numbers were cut for the fourth month running amid excess capacity. On the price front, operating costs rose sharply, in large part due to the return to work by furloughed workers, but firms cut output charges in a bid to keep business running. Lastly, business confidence improved again, hitting the highest point since February.
Similarly, the IHS Markit Manufacturing PMI increased from 38.3 in May to 49.0 in June, the highest reading in four months. Despite the improvement, the index still pointed to a deterioration of operating conditions. Much weaker falls in output and new orders lifted the index higher; however, the operating environment remained tough as the coronavirus continued to constrain demand and productive capacity, which in part led manufacturers to cut jobs at one of the sharpest rates since the 2009 global financial crisis. On a brighter note, sentiment amongst goods-producers turned optimistic for the first time in four months on hopes for greater demand ahead.
Author: Javier Colato, Economist