Spain's services sector continues to show improvement despite softer demand conditions; new work saw a decline for the first time in over a year-and-a-half. The upturn is driven primarily by existing contracts with the outlook looking more confident at least as well. HCOB notes that:
"Spain’s private sector economy expanded at a slightly faster pace in June, supported by marginal gains in both manufacturing and services, according to the latest HCOB PMI headline figures. However, activity growth remains well below the elevated readings observed at the beginning of the year. "Political uncertainty has emerged as a potential headwind, which could translate into heightened uncertainty in the months ahead - particularly if a major government crisis unfolds. This introduces downside risks to the economic outlook. Despite political tensions, service sector firms reported a slight improvement in their future business outlook. This may reflect a belief that the current political developments will not significantly disrupt underlying economic fundamentals or consumer demand.
"At the same time, underlying demand conditions in the service sector appear to be weakening. For the first time in a yearand-a-half, order books declined for overall new business. Still, the cautiously optimistic outlook encouraged firms to continue expanding their workforce, albeit at a slower pace through the second quarter. The decline in outstanding business also suggests that labour market conditions in the service sector may loosen further.
"Operating costs remain elevated, with wage pressures persisting across the services sector. Some firms also reported higher transportation costs, though this is likely a temporary effect, assuming the ceasefire in the Middle East holds. In response, prices charged by service providers rose again in June—with inflation accelerating to the fastest pace recorded so far this year."
This article was written by Justin Low at www.forexlive.com. Read More Details
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