Spain: Economic conditions improve further in June
July 5, 2017
The IHS Markit Purchasing Managers’ Index (PMI) Composite Output Index rose to 57.7 in June from 57.2 in May, marking the best reading since August 2015. As a result, the index lies further above the 50-point threshold that separates expansion from contraction in business activity.
The IHS Markit Spain Services PMI reached a nearly two-year high of 58.3 in June, a substantial improvement over the 57.3 reading recorded in May. The services sector closed the quarter on a strong note, with output and new orders growth both accelerating markedly in June. Higher volumes of new orders continued to put pressure on operating capacity, with backlogs of work rising for a fifth consecutive month and at the fastest pace in just shy of two years. This prompted firms to increase their staffing levels, with employment growth nearly reaching a one-year high. The strength observed in the sector continued to fuel widespread optimism, with business sentiment easing only marginally from May’s over two-year high. Regarding prices, input cost inflation ticked up in June, with salaries once again making the bulk of the increase. Output prices also rose robustly as firms noted improved pricing power, the result of strengthening demand.
Meanwhile, operating conditions in the manufacturing sector also signaled a solid expansion in the sector at the end of the quarter. The IHS Markit Spain Manufacturing PMI edged down from 55.4 in May to 54.7 in June, the result of slightly weaker rates of growth in a number of subcomponents, including output, new orders and employment. Nonetheless, the rate of expansion in all these variables remained robust, with employment growth coming in just slightly below May’s 19-year high. Backlogs of work continued to mount at a fast pace, while firms expanded their purchasing operations in light of improving demand. Regarding prices, both input and output inflation eased in June for a third consecutive month.
Author: David Ampudia, Economist