The services sector is boosting dynamism thanks to the better evolution of sales, while the manufacturing sector is reducing its contraction
All organisms expect that the Spanish economy – and the world – will hit the brakes this year. Expected growth in Spain for this year is around 1% (1.3% according to the Bank of Spain), well below the 5.5% increase in gross domestic product (GDP) in 2022. One of the leading indicators of economic activity, the PMI (a survey of companies on the purchase orders they receive), has entered positive territory after four consecutive months of contraction. This index rose to 51.6 points in January from 49.9 in December 2022, S&P Global Market Intelligence reported. This increase is the most pronounced since July last year and is above the average increase in the eurozone. Eurozone private sector activity rose in January for the first time since June 2022 and the PMI rose to 50.3 from 49.3 in December last year. Spain is among the countries that recorded the best activity data at the beginning of 2023, with an improvement of 1.7 points compared to the one point increase on average in the eurozone.
The improvement in private sector activity in Spain is mainly due to the boost in the services sector, whose PMI rose to 52.7 points from 51.6 last month, on the back of better sales performance. On the contrary, the manufacturing sector continued to shrink, albeit to a lesser extent, with a record 48.4 points compared to 46.4 in December. When the PMI index is above 50, it indicates an expansion; under 50, contraction; and if it is less than 42, it anticipates a recession in the economy.
Businesses in the services sector recorded a solid increase in new orders, including a strengthening in foreign demand, which rose for the first time in seven months. Due to the increase in new orders, companies increased their workforce for the fourth consecutive month. “Companies hope that conditions will continue to improve over the next 12 months and have increased their workforce for the fourth month in a row,” said Laura Denman, an economist at S&P Global Market Intelligence. However, Denman also warned that confidence remained below historical averages and respondents expressed concern about inflationary pressures.
As for the improvement in the euro zone, which returned to positive territory, “this is good news and suggests that the euro zone could escape a recession,” said Chris Williamson, chief economist at S&P Global Market Intelligence. But “it is too early to completely ignore recession risks,” warned Williamson, who has not yet fully experienced the impact of rising interest rates on economic growth. On Thursday, the European Central Bank (ECB) raised interest rates again by half a point to 3% and warned of further increases this year.
Activity in the services sector, which weighs the heaviest, returned to growth last month, with consumers absorbing the rising cost of living and fueling a modest recovery in demand. The services PMI rose to 50.8 from 49.8 in the previous month, while the manufacturing PMI continued to contract, from 47.8 in December to 48.8, still the best since August 2022.
The recovery in euro area activity for the third consecutive month was facilitated by a lower decline in demand, as new orders fell at their slowest pace in the past seven months, including a stabilization in demand in the services sector.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
