Key insights
- Spanish service sector growth slowed in March due to the Middle East conflict, which dampened demand and increased energy costs. New business and export sales weakened, leading to lower business confidence. Input costs rose sharply, outpacing output charge increases. While employment grew, the overall economic growth profile weakened compared to the previous quarter. Limited direct impact on US equities, but highlights global economic interconnectedness and potential inflationary pressures.
Investing.com -- Spain’s service sector expanded in March, but growth momentum weakened as the ongoing Middle East conflict dampened demand and pushed costs higher, according to data released Monday.
The S&P Global Spain Services PMI Business Activity Index rose to 53.3 in March from 51.9 in February, indicating stronger monthly growth. However, the first quarter average remained below levels seen in late 2025.
New business volumes increased at the slowest pace in nine months, with companies reporting that the Middle East war created market uncertainty and client hesitancy. New export sales declined for a third consecutive month, posting the steepest drop since January 2024.
Business confidence fell to its lowest level since September 2023, with service providers expressing concern about inflation’s impact on spending.
Input costs surged at the fastest rate since April 2023, driven by steep increases in energy and fuel prices linked to the Middle East conflict. Salary costs also rose. In response, companies raised their output charges at the strongest pace since August 2025, though the increase remained substantially below input cost inflation.
Service sector employment continued to grow, extending a three-and-a-half year expansion streak. Backlogs of work increased for the first time in four months.
The S&P Global Spain Composite PMI, which combines manufacturing and services data, registered 52.4 in March, up from 51.5 in February. Services drove the overall expansion, as manufacturing output declined for a second straight month.
Paul Smith, Economics Associate Director at S&P Global Market Intelligence, said Spain’s economy experienced a weaker growth profile in the first quarter of 2026 compared to the 0.8% quarterly gain in the fourth quarter of 2025.
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