Jun 03, 2022 03:26AM ET
By: AnalysisWatch
A survey showed Friday that activity in Spain's service sector slowed in May, although companies created more jobs than at any time in nearly a year as business capacity was stretched.
S&P Global's purchasing managers' index (PMI) for service companies, which account for about half of Spain's economic output, fell to 56.5 last month from 57.1 in April, but was still well above the 50 mark that separates growth from contraction.
Survey respondents said the easing of COVID-19 restrictions has boosted demand in industries such as tourism, although many businesses have struggled to increase capacity to keep up with the increase.
"This contributed to an increase in staffing levels in May," S & P Global said in a report. "Despite some reports of labor shortages, overall job growth rose to the highest level since June 2021."
The hiring of new employees led to higher wages, adding to already high inflation.
Spanish 12-month inflation rose to 8.7% in May from 8.4% the previous month, and core inflation, which strips out more volatile components, registered its fastest pace since 1995.
"Price pressures remain a concern, and second-round effects will be closely watched, especially given reports of higher wage payments and continued strong employment growth," wrote Paul Smith, director of S&P Global Economics.
The Spanish government cut its growth forecast for this year to 4.3% from 7% the previous month after reporting a sharp slowdown in the first quarter due to the negative impact of rising energy prices.
A sister survey on Tuesday showed that growth in the manufacturing sector accelerated last month.
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