- Prior 51.5
Spain’s services sector activity improved amid better demand conditions to start the new year. Adding to the positive developments is a pick up in jobs growth to its best level since May last year. However, price pressures remain a problem and that will make it tough for the ECB to try and justify sooner rather than later rate cuts. HCOB notes that:
“Spain once again underscores its current strength among the major European economies. The Services PMI sparks
optimism, suggesting that the momentum from a robust 0.6% GDP expansion in the fourth quarter could carry forward into
the first quarter of the new year. The PMI signals faster growth in January than the previous month, reaching 52.1 points.
The activity of Spain’s services providers has further improved, fuelled by two key factors. Firstly, according to panellists, the
introduction of new business and marketing measures in the new year has led to increased activity. Secondly, companies
report benefiting from a general increase in demand, mainly from the domestic market. Consequently, outstanding orders for
companies have increased – the corresponding index has entered the growth zone for the first time since June 2023. Orders
from abroad continue to decline, which is not surprising given weakness in the Eurozone.
“Services companies have accelerated their hiring activities for the second consecutive month. With more people getting
jobs and salaries rising, it fits the narrative of a general increase in demand. The latest GDP numbers confirm this view as
private consumption has supported GDP growth in the fourth quarter.
“In line with increased demand, inflation pressure remains elevated. Input and output prices rose at a faster rate in January
compared to the previous month. In the realm of input prices, there are reports of higher wages, increased employee costs
and general price increases. Increased input costs are passed on to customers by companies, reflected in the official
inflation data. Contrary to general expectations, Spain’s inflation rate in January has increased, now standing at 3.4%.”