Spain services sector falls into contraction territory as Middle East uncertainty weighs

AI summary

<ul><li>Services PMI 47.9 vs 52.0 expected</li><li>Prior 53.3</li></ul><p class="text-align-justify">Ouch. That's a rough hit as Spain's services sector sees a marked drop in both new business and confidence. The negative impact ties to the Middle East conflict, as costs continue to rise sharply on the month and weighing on demand conditions. HCOB notes that "sales volumes were down due to a stagnant business environment amid widespread uncertainty related to the war in the Middle East".</p><p class="text-align-justify">Adding that new export business was heavily hit, with conditions slumping by the most since July 2022. Meanwhile, sentiment on future activity among Spanish firms also took a heavy knock in falling to the lowest since December 2022.</p><p class="text-align-justify">As for inflation pressures, surging energy prices continue to have an impact with operating expenses increasing at a rate well above the survey average. That was despite the rate of inflation easing a little from the near three-year high in March.</p><p class="text-align-justify">HCOB notes that:</p><p class="text-align-justify">“Unlike the somewhat surprisingly decent manufacturing sector performance – although admittedly here growth was driven by client stockpiling as part of efforts to secure goods on fears of product shortages and supply disruption – the downbeat April PMI figures for services were somewhat less unexpected in the context of the knock to confidence that the war in the Middle East