Spain's PMI improves in June, although political uncertainty emerges as a potential headwind.

Spain's private sector activity improved last June, with the composite PMI rising to 52.1 points from 51.4 in May, driven by increases in services and manufacturing, although political uncertainty emerged as a potential headwind.

In June, the services sector PMI rose to 51.9 points from 51.3 in May, marking 22 months of expansion, while the manufacturing PMI rose to 51.4 points, up from 50.5 in May, the best reading of the year so far.

"Spain's private-sector economy expanded at a slightly faster pace in June, supported by marginal increases in both the manufacturing and services sectors," said Jonas Feldhusen, an economist at Hamburg Commercial Bank.

However, the expert warns that political uncertainty has emerged as a potential headwind, which could lead to worsening uncertainty in the coming months, especially if a major government crisis occurs.

"This probability introduces downside risks to the economic outlook," he added.

However, Feldhusen notes that, despite the political tensions, service sector companies reported a slight improvement in their outlook for future activity, which may reflect the assumption that current political events will not significantly disrupt underlying economic fundamentals or consumer demand.

On the other hand, it warns that underlying demand conditions in the services sector appear to be weakening, and for the first time in the last year and a half, total new order books have shrunk.

Furthermore, while companies continued to increase their workforces, albeit at a slower pace, the decline in backlogs of orders suggests that labor market conditions in the services sector may weaken further.