With Spain's recession deepening, the nation's service sector continues to struggle. Service industries such as hotels and restaurants are caught between rising input costs and falling output prices, as margins become compressed.
Markit: - The Spanish service sector ended the third quarter of 2012 deep in contraction territory. Moreover, September data signalled faster reductions in both activity and new orders as the economic crisis in Spain continued. Higher fuel costs contributed to an acceleration in input price inflation to its fastest since July 2011. On the other hand, companies continued to lower their output prices, despite a rise in the rate of VAT limiting the extent to which they were able to do this.
Driven by sharp declines in demand, employment is Spain's services sector has been hit especially hard. This is the 55th straight month of service jobs losses.
Markit: - With workloads falling, service providers lowered their employment accordingly, extending the current sequence of job cuts to 55 months. The sharpest reduction in staffing levels was at Renting & Business Activities companies, while Hotels & Restaurants was the only sector to take on extra staff.