Spanish services sector continues to rise solidly in October on spike in new orders, promotions

The Spanish service sector continued to see solid growth of business activity during October, on spike in new orders and promotions, in spite of a slowdown in new order growth. The rate of job creation also eased over the month, but business confidence strengthened.

The headline seasonally adjusted Business Activity Index posted 54.6 in October, down fractionally from the reading of 54.7 in September but still signalling a solid monthly expansion of business activity.  On the price front, the rate of cost inflation quickened to a 17-month high, but companies left their output prices unchanged.

New orders at Spanish service providers increased for the thirty-ninth consecutive month in October. Some panellists reported having secured new customers, while others mentioned the positive impact on new business of promotional activity. However, the rate of expansion eased to the slowest since November 2014.

Rising costs for fuel, energy and staff all contributed to an increase in input prices during October. Moreover, the rate of inflation quickened to a 17- month high. Hotels & Restaurants and Transport & Storage posted the fastest increases in input costs.

Meanwhile, expectations of new order growth and hopes of reduced political uncertainty were behind positive sentiment, with optimism signalled at around 47 percent of panellists.

"IHS Markit forecasts Spanish GDP to rise 3.1 percent in 2016, easing to 2.0 percent in 2017," said Andrew Harker, Senior Economist, IHS Markit.