Spain’s service activity slows in Dec as Omicron spreads -PMI

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MADRID, Jan 5 (Reuters) – Activity in Spain’s services sector grew in December at the slowest pace since April as the fast-spreading Omicron variant of COVID-19 shook consumer confidence and demand, a survey showed.

IHS Markit’s Purchasing Managers’ Index (PMI) of services companies, which account for around half Spain’s economic output, fell to 55.8 last month from 59.8 in November. It was the lowest reading since April’s 54.6, although still well above the 50 mark that separates growth from contraction.

Even though the service industry kept expanding, the emergence of the Omicron variant led cautious consumers to cancel bookings in hotels and restaurants, according to the businesses surveyed.

“These were naturally seen most often amongst providers of hospitality services, which given the importance of the holiday period to these firms in terms of sales and revenues means that new developments in the virus could not have come at a worst time,” the survey’s compiler IHS Markit said in a statement.

Hiring continued to increase in the services industry, which contributed to cost increases, IHS Markit said. Prices of electricity, energy, fuel, transport services and supplier goods in general were all up.

A sister survey of the manufacturing sector also showed activity growth slowing.

Both PMI readings will raise concern about the speed of the recovery in the fourth quarter of 2021.

Spanish statistics department INE last month revised upwards its estimates of growth in the second and third quarters, to 1.2% and 2.6% respectively, but said the economy contracted by 0.7% in 2021’s first quarter, more than previously estimated.

The government expects the economy to grow 6.5% in 2021 as a whole after 2020’s record 10.8% contraction.

(Reporting by Inti Landauro; Editing by Catherine Evans)

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