Insights 
VT 
Spain’s April services PMI registered at 53.4, lower than the expected 54.0, with the previous figure at 54.7. The composite PMI also decreased to 52.5 from 54.0.
This data indicates a slowdown, with diminishing new work growth over the month. Economic confidence has reached its lowest since November, and the service sector experienced weaker growth, while the manufacturing sector saw a decline in production.
International Market Tensions
Service providers faced a more challenging work environment, attributed to international market tensions impacting consumption and investment decisions. Despite the slowdown, business activity and order levels remain positive.
Operating costs for Spanish service providers are high, with trade tariffs impacting supply chains, leading to increased input prices and wages driving prices higher. Rising input costs are being transferred to customers.
Although optimism among Spanish service providers has declined to the lowest level this year due to uncertainties from US tariffs, this does not immediately affect Spanish workers. With continued order growth and increasing backlogs, service providers have expanded their workforces.
The recent data out of Spain, showing both services and composite PMIs slipping, paints a clear picture of moderation rather than contraction. What we are seeing is not a collapse in demand, but rather a gentle loss of speed—something more akin to a vehicle gradually decelerating than slamming on the brakes. The services PMI has inched beneath forecasts, while the composite has followed that downward drift, reinforcing the overall tone.
Falling Confidence Levels
A key point here is the mention of confidence levels falling to the lowest since November. That sort of timeline matters. Markets remember that period well—characterised not by chaos, but quiet hesitation amid global uncertainty. It suggests decision-makers have become more wary and less inclined to elevate risks in their portfolios. This change has not paralysed operations; ongoing order inflows and hiring underscore this. Yet a cautionary mood has clearly taken hold, and the numbers do not lie.
We should also keep a close eye on cost structures here. Service firms in Spain aren’t simply experiencing ordinary inflation. These pressures are notably tied to external frictions—most prominently, trade measures that have a direct influence on the price of inputs. As a result, providers are burdened with higher operational expenses, and because margins are not infinitely elastic, these costs are being passed along through price hikes. We cannot ignore this, particularly when monitoring longer-term inflation expectations.
Despite what appears to be a shift in forward sentiment, hiring has gone up. That detail should not be glossed over. Rising backlogs often lead to increased staffing, not out of expansionary ambition—but as a means of coping with work that continues to outpace current staffing levels. It’s a timing issue, where supply must rise to meet persistent though softening demand.
From our position, the data prompts a constructive reassessment of positions across duration-sensitive strategies. Yield sensitivity becomes critical when cost-push dynamics combine with slower activity, and even a mild slackening in service demand affects valuations. The weakening of manufacturing output, meanwhile, adds to the broader narrative that while domestic engines are running, they’re increasingly doing so against a backdrop of dampened global momentum.
Finally, if one reads between the numbers, there is no indication of systemic panic. Firms are hiring. Orders are growing. But the mood has cooled. Not frozen. Not fearful. Measured. That tone is the fulcrum on which expectations must now pivot.
We will watch for any divergence between pricing power and wage commitments in future releases, as that will influence not just inflationary pathways, but also profitability cycles for companies where input sensitivity remains high.
