Photographer: David Ramos/Bloomberg

Spain Outperforms Euro-Area Peers, Highlighting ECB's Challenge

  • Nation faces May 2 deadline to form government or fresh vote
  • Spain beats Germany, Italy and France as impasse continues

Spanish services and manufacturing expanded at the fastest pace in two months, outpacing the country’s euro-area peers in a challenge for the European Central Bank.

The Spain Markit Composite PMI index jumped to 55.1 in March, beating the median economist estimate in a Bloomberg survey calling for an increase to 54.2. The Spanish data contrasts with sluggish growth in the euro area, which saw the same index rising marginally to 53.1 in March from 53 in February and below a flash estimate of 53.7.

The divergence among nations highlights the difficulties facing the ECB as it seeks to revitalize the euro area’s uneven recovery and prop up inflation within a context of low energy prices. The euro area probably grew 0.3 percent in the first quarter, while Spain likely expanded 0.6 percent in the same period, Markit said.

“The euro zone economy failed to show any significant momentum in March,” said Chris Williamson, Markit chief economist. He added that sluggish growth reflects “lackluster” demand accompanied by falling prices as firms across the bloc compete at the expense of margins. He noted that Spain’s expansion remains “‘impressive.”

With the euro zone showed limited momentum, Spain continued to push ahead, beating Germany, Italy and France, even as lawmakers in Madrid struggle to pierce together a working government coalition. With no natural alliances in a four-way split parliament, the nation is facing a May 2 deadline to form a government or call fresh elections in June. So far, polls show no end to the deadlock with no single party expected to obtain a majority.

Despite the political deadlock in Spain, the economy has shown signs of resilience with jobless claims falling more than expected in March, adding to two months of falling unemployment. Meanwhile, a second index tracking growth in the services sector expanded to a four-month high for the month with business sentiment rising to the highest level so far this year as new orders and activity jumped in March.

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