Spain: Economic conditions remain expansionary in July
August 3, 2017
The IHS Markit Purchasing Managers’ Index (PMI) Composite Output Index fell to 56.7 in July from 57.7 in June as operating conditions in both the services and manufacturing sectors suggested slightly weaker expansions. That said, the index still lies comfortably above the 50-point threshold that separates expansion from contraction in business activity.
The IHS Markit Spain Services PMI eased slightly to 57.6 in July from its nearly-two-year high of 58.3 in June. The services sector had a robust performance as expansions in new orders and output maintained strong momentum. New business continued to put pressure on operating capacity and pushed backlogs of work to its highest level in two years. Firms increased their staffing levels again this month in order to fulfill the new demand as job creation remained strong this month. Regarding prices, input prices ticked up in July, with salaries once again being the major driver. Suppliers also began to raise prices in the wake of growing demand. Output prices also rose for the ninth consecutive month as firms gained more pricing power. The strength observed in the sector continued to fuel widespread optimism, with business sentiment easing only marginally from June.
Commenting on the service sector results, Andrew Harker, Associate Director at IHS Markit stated:
“The Spanish service sector began the second half of 2017 as it ended the first, seeing strong rises in activity, new orders and employment. The rate of expansion in output has been at a similarly elevated level since February, with little sign of an imminent slowdown at present.”
Meanwhile, operating conditions in the manufacturing sector also signaled a solid expansion in July. The IHS Markit Spain Manufacturing PMI edged down from 54.7 in June to 54.0 in July, the result of slightly weaker rates of growth in output and new orders. Raw material shortages may have played a role in the deceleration, which could be seen in longer delivery times and higher levels of backlogs. On the upside, the rapid acceleration in employment rates was the strongest since May 1998. Business sentiment was very optimistic looking forward.
Author: Lindsey Ice, Economist