“New orders from foreign customers increased solidly in October, extending the current growth period to eight months,” says the latest report of the leading indicator of the services sector PMI, prepared monthly by the international agency S&P Global based on 350 surveys of the tertiary sector. companies in Spain. The foreign sector has become the great engine of our economy, with a crucial role in exporting services and with a structural transformation: this force goes beyond tourism, and is concentrated in sales of consultancy, engineering, architecture or related to technology or telecommunications.
At the end of October, after experiencing the increase in GDP (Gross Domestic Product) of 0.8% in the third quarter, the most notable in the euro zone – and which indicates that 2024 will close with activity growth of 3% -, the Minister of Economy, Carlos Body, influenced the behavior of exports of non-tourist services. Agreeing with him and most experts, economist Daniel Kral of Oxford Economics stressed: “It’s a success story.” This analyst shows in the first graph (with INE data) which collects this information that exports of services are exceeding their trend before the historic shock of the pandemic. It is the only component of GDP that does so, with “public consumption” – the latter factor is directly linked to the spending efforts of administrations to mitigate the consequences of COVID and the inflationary crisis, and promote recovery –.
But the big change in the economy needs to be studied in more depth. “It’s not just thanks to the resumption of travel since the worst moment of the pandemic. High value-added services contributed more to the growth of services as a percentage of GDP,” continues Daniel Kral. This statement can be verified in the second graph of this report. The sum of the contribution of exports of “consulting”, “telecommunications”, “financial” and “insurance”, “research” services is greater than sales linked to “travel” and tourism, according to the National Accounts of the INE, in this case with data until the second quarter of this year.
“An element that explains the differential growth of Spain [sobre todo respecto a una Alemania y Francia estancadas] “There was the positive contribution of net foreign demand, reflecting both the expansion of services exports and the relative moderation of imports,” says the Independent Authority for Budgetary Responsibility (AIReF), in a report published this week.
“It is necessary to underline the good performance of tourist revenues which, far from exhausting their dynamism, maintained a notable expansion in the summer of 2024, with increases in the average expenditure per tourist, a less marked seasonality of visits and a greater diversification of host countries. origin of tourists and destinations within our country”, continues this institution, which concludes: “Added to this is the notable growth in exports of numerous non-tourist service activities such as professional activities, financial services, information and telecommunications, which constitute a common characteristic of other European economies. »7
“There are signs that seem to indicate a structural change in our economy: economic growth compatible with new, more skilled and technical jobs, compatible with increases in productivity and also compatible with a surplus balance of goods and services largely thanks to to the increase in non-production -tourist services It remains to be seen whether the Spanish economy is able to take advantage of this window of opportunity to consolidate an economic model that ceases to be based on low costs and. is moving towards a model with greater added value and therefore more resilient,” says Natalia Arias. , economist at the economic cabinet of the Commissions Ouvrières (CCOO).
Qualified and “cheap” workers
This great change in the Spanish foreign sector has positive causes and effects on the entire economy and on the labor market, and it is not exhausted. “Confidence in the future remained high in October. THE [empresas del sector servicios] respondents expect market conditions to remain positive,” S&P Global’s October PMI report said.
“Businesses continue to seek additional workers to meet growing demand. The employment rate [del mismo PMI] reached its highest level in 18 months, which underlines the confidence and dynamism of the services sector,” concludes this same analysis center. It is precisely in the labor market that there is a key to understanding the “success story” of service exports. Daniel Kral talks about the “accelerated changes brought about by the pandemic in remote working and digital progress, from which Spain benefits thanks to its highly skilled workforce and traditionally high youth unemployment (there are therefore a good supply of labor). ).
In other words, according to this economist, our country benefits from several circumstances. First, have a wider supply of skilled workers than other countries with a similar but lower level of training or which started from a lower unemployment rate. Second, these workers earn less than in other major European economies. Third, a good portion of these profiles are young people.
“This is a landscape of global competition, although other potential sources, such as Eastern Europe, are no longer as cost competitive, due to their economic convergence, and are reaching limits in terms of labor supply, because companies cannot fill positions with highly qualified workers,” adds the Oxford Economics expert.
A first more detailed analysis of the balance of payments (data on trade in goods and services abroad published by the Bank of Spain) and the Labor Force Survey (the INE’s EPA) brings us closer to this conclusion. “Between the first half of 2018 and the second half of 2024, (gross) exports of non-tourist services increased by 72%,” specifies the economic firm CCOO.
According to the union, this increase is mainly explained by the following subsectors. First, for “other business services [explica la mitad del incremento]”. Here the category “technical, trade-related and other business services” stands out, which explains a third of the growth and is a “catch-all” composed of engineering, architecture, commercial activities, security, waste treatment. In contrast, “professional and management consulting” is responsible for almost 15% of the increase. The other important sub-sector is that of “telecommunications, computing and information”, which explains almost a fifth of the growth in exports of non-tourism services. Finally, “transport” (9%) and “financial services” (9%) contribute on a smaller scale.
It is also interesting to analyze the increase in these exports by geographic destination: 71% of the increase is concentrated on the European market, particularly in the EU (mainly in France, Germany and the Netherlands). Outside the EU, the North American market also stands out.
If we try to reconcile this information with the information and categories of the labor market provided by the EPA, we see that in fact, companies in sub-sectors of the non-tourism services sector which represented the bulk of export growth In recent years, employment has grown more than the economy as a whole, as shown in the third graph of this information, with data that compares the third quarter of 2019 with the same period of this year — this is an exercise of approximation because these sectors also improved its domestic sales.
If we go up a notch in the EPA study, and introduce age as a variable, we see that the increase in employment of the youngest in the sectors that export the most services is even more significant. , as shown in the last graph. of this information.
In a recent in-depth analysis of the Salary Structure Survey (EES) of the INE from elDiario.es, it can be verified that young people are among the most precarious workers. Our country “has the most educated population in its history, which our economy is actually unable to integrate and reward accordingly. A qualified population, good telecommunications and digital infrastructure, a language common to 500 million people, salaries lower than those in other European countries, the possibility of continuing to integrate a qualified population due to the still high levels of unemployment and unemployment. “inactivity, favor Spain’s ability to increase its volume of activity in these sectors, improving its external balance in non-tourist services”, reflects Luiz Zarapuz, CCOO economist.
“The development of these branches of services with higher added value can initially rely on initially lower salaries, but in the medium term the stronger demand for these profiles/occupations should result in salary improvements, creations jobs and a reduction in unemployment. To the extent that these sectors require more workers, they can attract workers from other, lower-paid sectors who are looking to improve. In all cases, working conditions are not determined solely by the added value generated by the activity, nor by the qualification of its workers, but by their ability to organize collectively through unions and thus obtain improvements. of work and wages”, he concludes.
Weak business investment and exports of goods
“On the other hand, merchandise exports continue to show very modest progress due to weak demand from European countries which constitute our main export markets and competition from China in very important sectors of specialization of Spanish exports, such as automobiles,” deplores the AIReF in its report.
Another weakness of the Spanish economy is business investment. Daniel Kral believes that “Spain has been surprisingly weak, given that it is a large net beneficiary of European funds.” [del Plan de Recuperación] and is experiencing strong overall growth. As interest rates fall, demand prospects improve and absorption of EU funds accelerates (deadline for recovery absorption is August 2026), this should be positive for capital investments.”
