Spain July services PMI 53.9 vs 56.0 expected

• Prior 56.8
• Composite PMI 53.4
• Prior 55.8

It’s not a major data release but it won’t help to calm market fears on the day. The euro area economy is seen stuttering to start Q3 and that could well pressure the ECB into cutting in September. For now, traders have fully priced that in with the odds of a 50 bps rate cut even touching ~62% earlier in the day. HCOB notes that:

“Spain’s economy is continuing to outperform the eurozone. The good news first: Spain’s economy once again exceeded
expectations in the second quarter, with a growth rate of 0.8% QoQ. Currently, we in Germany can only dream of such a
figure. While the European Championship match between Germany and Spain was very close, economically, the countries
are currently playing in different leagues. Germany is simply unable to break out of stagnation, primarily due to the weak
industrial sector, with private consumption also falling short of expectations. Spain, on the other hand, still continues to
benefit from catch-up effects in the tourism sector. However, looking at the HCOB PMI, growth in Spain may slow somewhat
in the third quarter. In line with developments in the manufacturing sector, sentiment among Spain’s service providers is also
slightly dampening. Although growth continued in July, it slowed significantly. The Business Activity HCOB PMI fell by almost
3 points to 53.9.

“Spain’s service sector will grow slower in the third quarter. According to the latest PMI figures, the growth rate in Spain’s
service sector has decelerated in July. Despite persistently positive market conditions, activity and demand are showing a
slight cooling. Anecdotal evidence indicates that revenue growth is primarily driven by still strong foreign demand. Due to the
currently high workload resulting from demand and increasing backlogs, companies continue to seek to expand their
workforce. This ongoing trend has direct impacts on inflation, as wages are cited by companies as one of the main factors
for rising operating costs.”

This article was written by Justin Low at www.forexlive.com.