Spain’s service sector ended 2025 with its fastest monthly expansion in a year, supported by higher sales and stronger hiring, even as manufacturing activity lagged, according to a survey published on Tuesday by S&P Global.

The HCOB Spain Services PMI Business Activity Index rose to 57.1 in December from 55.6 in November, reaching its peak level for the year.

The index has remained above the 50.0 mark, which signals growth, for 28 straight months, Reuters news agency reports.

December’s growth was fuelled by higher sales and an uptick in new business, especially from major European markets.

Businesses also expanded their workforces more quickly, with many hires on permanent contracts, signalling confidence in continued demand.

At the same time, inflationary pressures increased, as input costs rose at their fastest pace since September due to higher supplier fees, energy expenses, and wage pressures. Service providers raised their selling prices in response, although competition constrained the extent of price increases.

“Spain's private sector economy closed the year on a strong note, driven primarily by the services sector,” according to Hamburg Commercial Bank economist Jonas Feldhusen. “Looking ahead to 2026, the outlook for services remains upbeat: order books are solid, and recent data suggest that last month’s dip in export orders was likely a temporary blip,” he went on to say.

In addition, a companion survey released on Friday revealed that Spain’s manufacturing sector shrank in December, marking its first contraction since April.

Indeed, the HCOB Manufacturing Purchasing Managers’ Index (PMI) fell to 49.6 in December from 51.5 in November, indicating a decline in operating conditions.

The December contraction saw the fastest drop in employment in two years, as manufacturers chose not to renew temporary contracts amid weakening demand.

This latest data highlights a growing divergence within Spain’s economy, with strong domestic demand bolstering the service sector, while manufacturing struggles with external pressures.

Rising service-sector inflation continues to be a concern for policymakers, as noted in recent European Central Bank discussions.