MADRID, April 7 (Reuters) - Spain's services sector expanded faster in March but demand softened, costs rose at the fastest pace in nearly three years and confidence weakened amid the war in the Middle East, a business survey showed on Tuesday.
The Spain Services PMI Business Activity Index rose to 53.3 in March from 51.9 in February, according to the survey by S&P Global. The 50-mark separates growth from contraction.
"Services firms are seeing big spikes in their energy and fuel bills," said Paul
Smith, economics director at S&P Global Market Intelligence. "With output charges also rising markedly, firms are understandably worried about the impact that high prices will have on spending in the near-term," he said.
"How growth will develop in the coming months will be very much dependent on the duration of the war in the Middle East."
Input cost inflation accelerated to its fastest pace since April 2023, driven by rising energy and fuel bills and higher salaries. Companies raised output charges at the fastest pace since August 2025, though the increase was slower than for input costs.
New business increased at the weakest pace in nine months, while new export business fell for a third straight month and at the sharpest rate since January 2024.
Confidence in future activity dropped to its lowest since September 2023. Firms cited uncertainty over the Middle East conflict, and worries that higher inflation would hurt spending, the survey showed.
Employment still rose solidly, extending a growth run of three-and-a-half years, and backlogs of work increased for the first time in four months, albeit only marginally.
The survey said average services activity in the first quarter was notably weaker than in the final three months of 2025.
Spain's composite PMI rose to 52.4 from 51.5, with services offsetting a second straight monthly decline in manufacturing output.
(Reporting by David Latona; Editing by Hugh Lawson)
