Spain: Businesses more upbeat, but clouds of uncertainty remain – ING

According to Steven Trypsteen, Economist at ING, the rise in the Spain’s service purchasing managers’ index from 52.5 to 54.0 is due to the stronger growth of incoming new business.

Key Quotes

“Capacity remained under pressure as can be seen by a further rise in backlogs. Employment also rose, although it was the lowest increase in two years. Manufacturing purchasing mangers’ index rose slightly from 51.4 to 51.8. However, the sector, suffered from an increase in inventories, with some firms talking about overproduction. That said, new export orders rose at the fastest rate since July.”

“The composite PMI shows that overall businesses are more upbeat in October compared to September. The index rose to 53.7 from 52.5 in September – the biggest monthly increase since January 2018.”

“The slowing external environment is likely to harm the Spanish economy, and we think the economy will slow to 0.5% QoQ in the fourth quarter. On top of that, there is still the uncertainty about the 2019 budget.”

“We forecast an annual growth rate of 2.6% in 2018 and 2.0% in 2019, a clear deceleration of economic activity given the plus-3% growth since 2015.”