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

S&P World (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 effectively above the 50 mark that separates development from contraction.

Respondents to the survey mentioned 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 World mentioned in a report. “Regardless of some studies of labour shortages, total employment development picked as much as its highest degree since June 2021.”

Hiring new workers led to larger 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 working at its quickest tempo since 1995.

“Worth pressures stay a priority, and second-round results shall be intently watched particularly given studies of upper wages being paid and robust employment development being sustained,” wrote S&P World Economics Director Paul Smith.

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

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