According to the report from IHS Markit, Spain’s service sector endured a challenging start to 2021 as local restrictions related to dealing with the global coronavirus disease 2019 (COVID-19) pandemic and inclement weather conditions served to restrict activity. Demand from both home and abroad was again down, and a lack of new work meant firms chose to cut employment numbers at their units for an eleventh successive month. Nonetheless, operating expenses increased at an accelerated rate, but the difficult business environment led to another round of falling output charges.

January’s headline Business Activity Index declined sharply to 41.7 in January, from 48.0 in December. By posting below the 50.0 no-change mark for a sixth successive month, the latest index again indicated another month of declining activity in Spain’s service sector and to a considerable degree. In line with recent months, the effects of local restrictions related to dealing with COVID-19 continued to have a noticeable and negative impact on the performance of the services economy. Moreover, the situation was exacerbated by recent snowstorms, which reportedly further weighed on market activity. Subsequently, volumes of new business were also down for a seventh month in succession, with the rate of contraction accelerating since the end of last year. Both domestic and foreign sales were lower: new export business declined for a twenty-first month in a row, and at the sharpest rate since October. 

Service providers retained a reasonable degree of confidence that activity will increase over the coming 12 months, although overall optimism was at its lowest in three months amid worries over the long-term economic impact of the pandemic. However, there remained hopes that vaccine rollouts will provide the platform for a return to economic normality and business growth in a year’s time.