MADRID (Reuters) –
Spain’s service sector expanded at its slowest pace in 18 months in May, as ongoing uncertainty, particularly from international clients, weighed on demand growth, S&P Global reported on Wednesday.
The HCOB Spain Services PMI Business Activity Index fell to 51.3 in May from 53.4 in April, remaining above the 50.0 threshold that indicates growth. However, it was the weakest expansion in activity since November 2023.
New business volumes rose marginally, continuing an 18-month trend, but at the slowest rate during this period.
“Within the service sector, demand conditions appear constrained—particularly in terms of new business. Reports frequently link this development to uncertainty stemming from tariffs, especially among internationally engaged clients,” said Hamburg Commercial Bank economist Jonas Feldhusen.
New export business declined for the first time since last November, with panellists citing tariff-related uncertainties.
Despite the slowdown, firms continued hiring, although at a reduced pace, with employment growth at its weakest since February 2024.
This additional capacity allowed companies to make modest reductions in backlogs of work for the first time since December 2023.
Input cost inflation remained elevated, driven by rising wages and supplier charges, although the rate of increase eased to its lowest level since last November.
Confidence in the outlook weakened, falling to its lowest level since November 2023, as firms expressed concerns over the challenging economic environment and global uncertainties.
A sister survey earlier this week showed manufacturing sector rebounded and expanded for the first time since January.
Spain’s economic growth slowed slightly in the first quarter but the manufacturing sector kept expanding rapidly, the National Statistics Institute said on Tuesday. The government expects the economy to expand 2.6% this year, a much faster rate than in neighbouring countries such as France, Germany or Italy.
(Reporting by Inti Landauro; Editing by Hugh Lawson)
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