MADRID, May 6 (Reuters) - Spain's services sector contracted in April for the first time since August 2023 as uncertainty linked to the U.S.-Israeli war with Iran hampered demand and confidence, a business survey showed on Wednesday.
The Spain Services PMI Business Activity Index fell to 47.9 in April from 53.3 in March, the survey by S&P Global showed. The 50-mark separates growth from contraction.
"Firms widely reported that market demand had softened as widespread uncertainty led businesses and consumers
alike to hesitate when it came to spending decisions," said Paul Smith, economics director at S&P Global Market Intelligence.
He added that a bleaker outlook due to the war could be helping to keep companies' pricing power "just about in check".
New business fell for the first time since last June and at the sharpest rate in more than four years. Export demand was especially weak, with international sales declining at the steepest pace since mid-2022.
Confidence also deteriorated sharply. Sentiment among service providers fell to its lowest level since December 2022 as firms said clients were delaying investment and new projects amid a fragile geopolitical environment.
Employment nevertheless continued to rise, extending growth seen since October 2022, although the pace softened from March. Backlogs of work edged up for a second month, partly because shortages of products such as IT equipment hindered contract fulfilment.
Price pressures remained elevated in April. Input costs rose at a historically high pace - driven by energy, fuel, supplier and wage costs - while output charges increased markedly and were little changed from March's seven-month high.
The weakness in services pushed the S&P Global Spain Composite PMI down to 48.7 from 52.4, leaving overall private sector activity in contraction territory for the first time in nearly two-and-a-half years, even as manufacturing output rose solidly.
(Reporting by David Latona; Editing by Joe Bavier)
