Once again, Spain continues to be the bright spot in the euro area. This marks the steepest rise in activity for over a year. HCOB notes that:

“In May, Spain’s services sector continued to expand. Activity and new business both saw substantial growth, with the
Services PMI Business Activity Index rising to 56.9. This growth was driven by a strong increase in new business, which has
now risen for six consecutive months. Panellists reported – as also seen in the manufacturing sector – higher overall
demand and greater success in acquiring new customers. Particularly encouraging was the significant rise in export
business, especially in key markets like France and Germany.

“Spanish service providers are urgently seeking workers. Service providers continued to expand their workforce to manage
growth, although the employment increase was the smallest since February. Despite the workforce expansion, staff numbers
were often deficient, leading to a further rise in outstanding business – the steepest since April 2023.

“The services sector continues to face the issue of rising prices. The primary reason is rising wages, which constitute a
significant amount of expenses in the labour-intensive services sector. Consequently, service providers are passing these
costs on to consumers. The cost pressures indicated by the PMIs are also reflected in official consumer price developments
over the past three months, which have now alarmingly risen to 3.6%. If the ECB is about to lower interest rates in the June
meeting, as we anticipate, there is additional concern about price developments in the coming months.”