• Prior 51.9

Well, don’t let the headline estimate fool you. Spain’s services sector increased solidly last month owing to a further rise in new business received by companies. However, new order growth softened to its lowest level in nine months as the latest Middle East developments start to give rise to uncertainty. Of note, new export sales declined again, whilst confidence in the outlook was the lowest since September 2023.

Besides that, higher energy prices are also starting to be a factor as overall operating expenses rose at a rate not seen since April 2023. That comes as input price inflation surges and is going to become more and more of a problem in the months ahead.

HCOB notes that:

“Spain’s service sector expanded at a solid rate in March, with growth picking up on February’s low. However, despite this improvement, when combined with a downturn in manufacturing output in March, Spain’s economy has experienced a weaker growth profile overall in the first quarter of 2026. Expect therefore official data on GDP for early 2026 to show a slower rate of expansion than the 0.8% quarterly gain reported for the fourth quarter of 2025.

“How growth will develop in the coming months will be very much dependent on the duration of the war in the Middle East. The conflict has already led to a huge degree of business and consumer uncertainty, with panellists noting that services new business growth has softened, and export business, already under strain before the start of the war, has deteriorated sharply.

“Moreover, services firms are seeing big spikes in their energy and fuel bills, leading to the strongest increase in overall input costs for nearly three years. With output charges also rising markedly, firms are understandably worried about the impact that high prices will have on spending in the near-term – and therefore their business performance over the coming months.”

This article was written by Justin Low at investinglive.com.