Spain's December services activity grows at fastest pace in 20 months, PMI shows

MADRID (Reuters) - Spain's service sector expanded in December at its fastest pace since April 2023, driven by a sharp rise in new business and a recovery in activity following the country's deadly flooding in late October, S&P Global reported on Monday.

The HCOB Spain Services PMI rose to 57.3 in December from 53.1 in November, marking the sixteenth consecutive month above the 50.0 threshold that indicates growth and the fastest pace since April 2023.

The increase was attributed to strong demand for services and a boost from insurance claims and clean-up operations after the floods that devastated the region of Valencia in late October killing more than 200 people.

"These are impressive figures for the end of the year," said Jonas Feldhusen, an economist at Hamburg Commercial Bank. "The increased activity and new orders are resulting in more work, and companies are trying to hire additional workers to cope with the workload."

Employment in the service sector rose for the 27th consecutive month, although the rate of job creation slowed down. Despite higher staffing levels, backlogs of work continued to grow, reaching their highest since May 2022.

The country's labour ministry on Friday reported the number of jobless people in December was at its lowest for such a month since 2007.

Inflationary pressures intensified, with input costs rising due to higher wages and fuel prices. Service providers passed on these costs to clients, leading to the steepest rise in output prices in six months.

Looking ahead, confidence in the sector's outlook strengthened, with optimism reaching its highest level since May 2024.

A sister survey released last Thursday showed manufacturing activity rose for an 11th consecutive month in December.

The country's central bank on Dec. 17 raised its economic growth forecast for the full year to 3.1% from a previous 2.8%. The economy grew 2.5% in 2023.

(Reporting by Inti Landauro; Editing by Hugh Lawson)