Catalonia uncertainty hits Spain’s economy

Spain’s services industry took a hit last month during the crisis in Catalonia, dealing a blow to one of the euro area’s best-performing economies.

IHS Markit’s monthly gauge fell the most in more than two years, dropping 2.1 points to 54.6, according to data published on Monday. While the gauge still signals growth, that’s the weakest reading since January and far below the median forecast of economists.

Ken Wattret, an economist at TS Lombard in London, said “political hullaballoo over Catalonia has taken its toll,” and the softer services activity tallies with reports about a “sharp drop in tourism-related activity.”

With Catalonia accounting for about 20 percent of Spanish output, it will be crucial for the entire economy to bring the crisis to an end after more than a month of chaos.

In its report, IHS Markit said confidence among service providers fell to the lowest in more than a year and some companies have been “delaying spending decisions amid uncertainty.”

Still, Cathal Kennedy, European economist at RBC Capital Markets said the effect on the Spanish economy next year is likely to be “relatively small.” While the crisis may shave off as much as 0.2 percentage point from fourth-quarter growth, now “may mark the high point of the impact.”