Service sector growth in Spain slows down, Middle East conflict hits demand

LootboxPhobia · 2026-04-07T09:11:04+00:00

The Spanish service sector continued to expand in March, with the PMI index rising to 53.3, but the growth rate slowed down. The Middle East conflict led to weakened demand and rising costs, resulting in slow new business growth and business confidence dropping to a low point. Service sector employment continued to grow, but manufacturing output declined, indicating a weaker overall economic outlook.

LootboxPhobia

2026-04-07 09:11:04

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Investing.com – The data released on Monday showed that Spain’s services sector continued to expand in March, but the growth momentum weakened. Ongoing Middle East conflicts suppressed demand and pushed up costs.

S&P Global’s Spain Services PMI business activity index rose from 51.9 in February to 53.3 in March, indicating that month-on-month growth strengthened somewhat. However, the first-quarter average remained below the level seen at the end of 2025.

New business volumes grew at the slowest pace in nine months. Companies said the Middle East war had caused market uncertainty and made customers hesitant. New export sales fell for the third consecutive month, marking the largest decline since January 2024.

Business confidence fell to its lowest level since September 2023, as service providers expressed concerns about inflation’s impact on spending.

Input costs surged at the fastest rate since April 2023, driven by a substantial jump in energy and fuel prices linked to the Middle East conflict. Labor costs also rose. In response, firms increased output prices at the strongest pace since August 2025, although the increase remained far below input cost inflation.

Employment in the services sector continued to grow, extending the three-and-a-half-year expansion trend. Backlogs of work increased for the first time in four months.

S&P Global’s Spain Composite PMI index (combining manufacturing and services data) was 52.4 in March, up from 51.5 in February. The services sector drove the overall expansion, while manufacturing output fell for the second consecutive month.

Paul Smith, Deputy Director of Economics at S&P Global Market Intelligence, said Spain’s economic growth outlook for the first quarter of 2026 is weaker compared with the 0.8% quarterly growth in the fourth quarter of 2025.

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