Spain Services PMI April 2008

Eurozone service sector growth held steady at a slightly slower pace in April as faster growth in Germany contrasted with weakness elsewhere; Spain in particular stood out and reported record job cuts.

The RBS/NTC Eurozone Services Business Activity Index rose from 51.6 in March to 52.0 in April, coming in slightly above the earlier flash estimate of 51.8. However, the rise still indicated only a very modest acceleration in growth, with the rate of increase remaining weak by historical standards of the survey (and only slightly above the average reading for Q1, which had been the weakest quarter since Q2 2003).


Spain


Spain's service businesses cut jobs in April at the fastest pace in the near nine-year history of an NTC survey of the sector as demand contracted for the sixth month running, data from NTC showed. In the wake of a Bank of Spain forecast that economic growth slowed to 2.8 percent in the first quarter from 3.5 percent in the final quarter of 2007, the PMI survey showed both activity and new orders fell sharply, although the slide was slightly less pronounced that a month ago.



The headline index for the sector edged up to 42.5 in April from 40.9 in March, while the new business index was unchanged from March's survey low of 40.2, its sixth month below the 50 divide between growth and contraction.

Chris Williamson, chief economist at NTC Economics, said the survey showed that Spain's downturn had expanded well beyond the property sector -- the engine for a decade of Spanish growth which is now running out of steam. "It looks like there's a broad-based downturn occurring here, and there's evidence to suggest that's going to continue in the coming months," Williamson said.

Only two sectors of the six sectors surveyed -- business-to-business services and IT -- showed any growth at all, said Williamson.

"All sectors exposed to the consumer are having a hard time, which suggests that basing forecasts on weakness confined to property and construction is being rather hopeful."

Official data last month showed the unemployment rate jumped in the first quarter to a 3-year high of 9.6 percent and NTC said that based on the PMI survey, that would rise further in the second quarter. The PMI showed the sharpest decline in employment in the sector since the survey began in August 1999 as companies adapted to reduced workloads. Optimism also hit a survey low, for the third month running, although more than one third of those surveyed thought business would pick up in the next year.