Spain: Composite PMI slumps to four-month low in September on a deteriorating services sector
October 5, 2020
Mainly reflecting a sharper contraction of services activity, the IHS Markit composite Purchasing Managers’ Index (PMI) fell from 48.4 in August to 44.3 in September—the lowest reading in four months. Consequently, the index dropped further below the 50-threshold, indicating declining business activity over the previous month.
The IHS Markit Services PMI tumbled from 47.7 in August to 42.4 in September, indicating a quicker pace of declining service sector activity. Falling new business and job cuts were largely behind the downturn. New work slumped for the third month running in September amid rising Covid-19 infections and faltering demand, with export orders in particular taking a severe hit. Amid declining workloads, jobs came under pressure again, with firms cutting staffing levels for the seventh consecutive month. On the upside, business confidence rose to a three-month high as service providers grew hopeful over a solid resumption of activity once the health crisis subsides.
In contrast, the IHS Markit Manufacturing PMI climbed from 49.9 in August to 50.8 in September. As a result, the print pointed to a slight improvement in operating conditions in the manufacturing sector. Despite another decline in new orders, output rose for the third successive month as demand conditions improved, especially from international clients. Due to higher production requirements, manufacturers increased employment and thus putting an end to a 16-month streak of job cuts. Moreover, sentiment among goods-producers rose to its highest in seven months, though concerns remained over the longer-term impact of the pandemic on their business.
Author: Javier Colato, Economist