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Improvement In Demand Buoys Services PMI

SPAIN DATA
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Spanish February services PMI was above consensus at 54.7 (53.5 cons, 52.1 prior) - the highest reading since May 2023. The rise contrasts what was seen in February's Spanish EC services survey (which fell to 15.2 from 18.8).
  • Details suggest that the improvement in services demand is leading to higher employment and wage costs, increasing inflationary pressures.
  • This plays into the ECB narrative/early ’24 market repricing, which has resulted in consensus moving to June re: the timing of the first ECB rate cut.
  • Spanish yields are off intraday lows, but moves following the release have been muted.
Key notes from the release:
  • "The upturn in activity was closely intertwined with a similar rise in new business. Firms commented on a notable improvement in demand for services during February".
  • "However, growth largely emanated from domestic sources: new export business declined in February for a seventh successive month"…"some reports of political and economic uncertainty weighing on foreign sales".
  • "There are hopes of an improvement in demand, and that the start-up of new projects will bolster sales"…."These positive forecasts fed through into hiring activity".
  • "Rising employment did however serve to push up average employment costs according to the latest data"…"Companies responded with their own price rises".

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Spanish February services PMI was above consensus at 54.7 (53.5 cons, 52.1 prior) - the highest reading since May 2023. The rise contrasts what was seen in February's Spanish EC services survey (which fell to 15.2 from 18.8).
  • Details suggest that the improvement in services demand is leading to higher employment and wage costs, increasing inflationary pressures.
  • This plays into the ECB narrative/early ’24 market repricing, which has resulted in consensus moving to June re: the timing of the first ECB rate cut.
  • Spanish yields are off intraday lows, but moves following the release have been muted.
Key notes from the release:
  • "The upturn in activity was closely intertwined with a similar rise in new business. Firms commented on a notable improvement in demand for services during February".
  • "However, growth largely emanated from domestic sources: new export business declined in February for a seventh successive month"…"some reports of political and economic uncertainty weighing on foreign sales".
  • "There are hopes of an improvement in demand, and that the start-up of new projects will bolster sales"…."These positive forecasts fed through into hiring activity".
  • "Rising employment did however serve to push up average employment costs according to the latest data"…"Companies responded with their own price rises".