MADRID (Reuters) – Exercise in Spain’s companies sector slowed down in Might although firms created jobs on the quickest price in nearly a 12 months as firms’ capability is stretched, a survey confirmed on Friday.

S&P International (NYSE:)’s Buying Managers’ Index (PMI) of companies firms, which account for round half of Spain’s financial output, fell to 56.5 final month down from 57.1 in April, however nonetheless nicely above the 50 mark that separates development from contraction.

Respondents to the survey stated the loosening of COVID-19 restrictions boosted demand in industries like tourism, although the uplift left many firms struggling to extend capability to maintain up.

“This helped to drive a rise in staffing ranges throughout Might,” S&P International stated in a report. “Regardless of some stories of labour shortages, general employment development picked as much as its highest stage since June 2021.”

Hiring new employees led to greater wages, which compounded already excessive inflation.

Spain’s 12-month inflation rose to eight.7% in Might from 8.4% the earlier month and core inflation, which strips out extra unstable parts, is operating at its quickest tempo since 1995.

“Value pressures stay a priority, and second-round results shall be carefully watched particularly given stories of upper wages being paid and powerful employment development being sustained,” wrote S&P International Economics Director Paul Smith.

Spain’s authorities slashed its financial development outlook for this 12 months to 4.3% from 7% a month in the past after reporting a pointy slowdown within the first quarter as a result of damaging impression of hovering power costs.

A sister survey on Tuesday confirmed exercise development within the manufacturing sector accelerated final month.