Spain's service sector experienced its strongest growth since April 2023 in December, spurred by a significant increase in new business and a recovery in activity after the deadly flooding in late October, S&P Global reported on Monday.

The HCOB Spain Services PMI climbed to 57.3 in December from 53.1 in November, marking 16 consecutive months above the 50.0 growth threshold and the fastest expansion in nearly eight months.

The growth was attributed to robust demand for services, along with a surge in insurance claims and clean-up efforts following the devastating floods in late October that struck the Valencia region, claiming over 200 lives.

“These are impressive figures for the end of the year. The increased activity and new orders are resulting in more work, and companies are trying to hire additional workers to cope with the workload,” said Jonas Feldhusen, an economist at Hamburg Commercial Bank.

Employment in the service sector increased for the 27th straight month, although the pace of job creation slowed. Despite the rise in staffing levels, backlogs of work continued to grow, reaching their highest point since May 2022.

In addition, the country's labour ministry reported on Friday that the number of unemployed individuals in December was the lowest for that month since 2007, Reuters reports.

Furthermore, inflationary pressures increased as input costs rose due to higher wages and fuel prices. Service providers transferred these costs to clients, resulting in the largest increase in output prices in six months. 

Looking forward, confidence in the sector's future improved, with optimism reaching its highest point since May 2024.

Furthermore, a related survey released last Thursday revealed that manufacturing activity increased for the 11th consecutive month last month.

On 17th December, the country's central bank revised its full-year economic growth forecast to 3.1%, up from the previous estimate of 2.8%. The economy grew by 2.5% in 2023.