Spain’s Service Sector Posts Strong Growth in December

Spain’s service sector experienced accelerated growth in December. This was driven by a surge in new business and recovery efforts following the flooding that impacted parts of the country earlier in 2024. The sector’s expansion was further supported by high confidence in the economic outlook. It prompts firms to hire additional staff despite capacity pressures and rising backlogs.

The HCOB Spain Services PMI® Business Activity Index, a key indicator of economic performance, surged to 57.3 in December, up from 53.1 in November. This marked the strongest monthly increase in business activity since April 2023. The index has remained above the critical 50.0 mark for 16 consecutive months, signaling consistent growth in the service sector.

Spain’s Service Sector Posts Strong Growth in December

The growth was largely attributed to strong demand for services, with some businesses reporting a return to normal activity following the disruption caused by the DANA weather phenomenon. Additionally, the flooding boosted demand through increased insurance claims and subsequent clean-up efforts. As a result, new business volumes rose sharply, with the fastest growth since April 2023. This growth was also bolstered by a recovery in export sales, fueled by higher tourism from nearby European countries.

In response to higher demand, companies continued to increase their workforce, marking the 27th consecutive month of rising employment. However, despite hiring more staff, backlogs of work continued to grow. It was with the rate of increase reaching its highest level since May 2022.

On the price front, input cost inflation accelerated, driven by rising wages, supplier charges, and fuel prices. In turn, service providers raised their prices at the fastest rate in six months to protect profit margins.

Looking ahead, business confidence remained strong in December, with expectations of a more stable macroeconomic environment and increased sales demand in the coming year.

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