- Prior 57.1
The good news is that Spain's services sector continues to maintain growth conditions to start the year. However, there is a notable downshift with the reading here well missing on estimates. Sluggish demand was to blame with an easing of new business growth, the weakest since June last year.
That aside, employment growth remains positive and business confidence also continues to pick up. The latter is seen improving to a ten-month high in fact. The slight downside is that input cost pressures remained a concern for firms in January, with latest data showing another month of elevated input price inflation.
HCOB notes that:
“The latest HCOB PMIs indicate that growth momentum in Spain’s private sector eased somewhat at the start of the year, with both the services sector and manufacturing contributing to the slowdown. This cooling follows an exceptionally strong final quarter of 2025, when GDP expanded by 0.8% quarter‑on‑quarter. Given the diminishing underlying impulses, such a rapid pace of expansion is unlikely to be sustained throughout 2026.
Growth of business activity in Spain’s services sector softened at the beginning of the year, albeit from a high level. While this points to a normalization of growth dynamics, the sector’s overall expansion remains robust. However, new orders data reveal a moderation in demand momentum, with foreign orders in particular declining, especially from key euro area partners, whose weaker economic performance is increasingly reflected in Spanish export demand.
Despite the slowdown in January, firms remain confident about the business outlook for the year ahead. This optimism is also mirrored in hiring intentions: companies anticipate a higher workload and continued growth and are therefore seeking to expand capacity. Yet this comes with a cost. Input price inflation in the services sector - driven largely by labour costs - have stabilised at elevated levels following the inflationary surge in 2022. Wage pressures therefore remain a challenge, both from a corporate profitability and a price‑stability perspective.”
