Lorraine Williamson
Spain business costs rising is no longer just a warning from energy markets. Fresh survey data shows Spain’s services sector kept growing in March, but under the sharpest cost pressure since April 2023, while business confidence slipped to its lowest level since September 2023 as firms worried about the war in the Middle East, higher inflation and weaker spending.
The headline number is not recessionary. Spain’s Services PMI rose to 53.3 in March from 51.9 in February, staying above the 50 mark that separates growth from contraction. But underneath that, the picture is less comfortable: new business rose at the weakest pace in nine months, export orders fell for a third straight month, and firms said the first quarter of 2026 was weaker than the final stretch of 2025.
Companies were still hiring, and Spain’s composite PMI edged up to 52.4, helped by services offsetting another fall in manufacturing output. Even so, the cost side of the survey is what stands out most. Input cost inflation accelerated to its fastest pace since April 2023, driven by energy, fuel, and salary bills, while firms raised their own prices at the fastest rate since August 2025.
The pressure is already visible in Spain’s inflation data
Official inflation figures show that the squeeze is no longer theoretical. Spain’s flash CPI for March 2026 came in at 3.3% year on year, up from 2.3% in February, while prices rose 1.0% month on month. The INE said the change was driven mainly by higher prices for fuel and lubricants for private vehicles, with electricity also playing a role because it fell less sharply than a year earlier.
That matters because it links the business survey to what households are starting to feel. Firms are paying more, and part of that is already feeding into the official inflation picture. The risk now is not only that margins get squeezed, but that weaker consumer demand follows if those higher costs keep filtering through. The final sentence here is an inference based on the PMI survey’s concern about spending and the INE inflation data.
Not every price in Spain has surged yet
There is an important nuance here. RTVE’s breakdown of the March CPI data said energy products rose 7.5% year on year and 6.8% month on month, but that increase had not yet broadly spread across the rest of the economy. Industrial goods were only slightly more expensive, and fresh food prices actually fell 0.4% month on month.
That makes this a stronger business story than a simple “supermarket prices are soaring everywhere” story. The pressure is real, but it is still moving through the system unevenly. Energy, transport and operating costs are taking the hit first, with wider consumer spill over still limited for now.
Madrid is already trying to cushion the blow
Spain’s government has not waited for the full impact to land. A Real Decreto-ley approved on 20 March set out a Plan Integral de Respuesta a la Crisis en Oriente Medio, including temporary flexibility for some electricity and gas supply contracts until 31 December 2026 and an 80% reduction in some electricity network access costs for electro-intensive industry.
At the European level, Spain has also joined Germany, Italy, Portugal, and Austria in calling for an EU-wide windfall tax on energy company profits, arguing that any extraordinary gains linked to the crisis should help fund temporary relief and curb inflationary pressure on consumers.
Why this matters beyond the boardroom
For readers in Spain, the main takeaway is straightforward. This is not yet a full-blown repeat of the 2022 energy crisis, but it is clearly no longer just a geopolitical story happening elsewhere. Businesses are still expanding, yet they are doing so with rising bills, softer demand, and weaker confidence, while official inflation is already moving up again.
Spain’s economy is still moving, but the cost of keeping it moving has risen sharply. If the conflict drags on, the question will not be whether businesses feel it, but how much more of it they can pass on before households start pulling back. The final sentence is an inference based on the PMI survey’s pricing and demand signals.