The Spanish service sector was signed in August for the first time since October last year. Ten months later, activity levels and orders have declined. Survey data shows the activity index fell to 49.3 in August from 52.8 in July.
The HCOB PMI index of Spanish service sector commercial activity is as follows: below the unchanged 50.0 level for the first time since October 2022. This ends the expansion series that has been going on for nine months. And while the sector’s deterioration has been “generally mild,” the truth is that the rate of decline is “the sharpest in almost a year.”
The survey shows signs of a “Slowing demand environment’, which has contributed to the decline in activity. Order intake is down for the first time in ten months, albeit only slightly. In any case, conditions for overseas market demand were particularly poor, as the fall in new export orders was the sharpest in a decade.
All of this has clear effects: companies have reacted to the drop in incoming orders by reducing the growth rate of their templates. The PMI survey shows that while employment levels have continued to rise, The growth rate in August was the slowest since last January.
Due to the continued contraction and the drop in new orders, the companies had excess capacity to catch up on the work to be completed by the middle of the third quarter of the year. Thus, orders awaiting fulfillment have declined for the first time this year, at the highest rate since September 2022. Some of the companies even say they have completely eliminated delayed workloads.
Regarding the prices, Input costs have increased for the thirty-ninth straight month. In fact, the rate of increase, after accelerating again since July, was the strongest in three months. Reports of rising wage pressures remain widespread among the companies surveyed, and rising fuel costs have also attracted attention as a current driver of inflation.
The companies continue to pass these cost increases on to their customers, which has led to a sustained increase in sales prices. However, contrary to the trend observed for input costs, sales price inflation remains on a downward trend, reaching its lowest level in almost two years.
Despite the weakening trends in the industry, Business growth expectations are positive, and confidence has even increased slightly in August compared to what was observed in the previous survey. Factors supporting the optimism are hopes for improving market conditions and planned investments in companies’ commercial departments. However, the mood remains subdued.
