This latest reading gives us an indication of just how rapidly the global credit crisis is now undermining Spain's long-running economic expansion, an expansion which had drawn most of its force from household borrowing against rapidly rising housing prices.
"In Spain it seems to be an all-round malaise," said Chris Williamson, NTC's chief economist. "It was a dreadful survey."
This result follows the manufacturing survey on Tuesday which showed Spain's manufacturing sector put on its worst performance in over six years in March as output shrank sharply and firms reduced staffing.
The Spanish services PMI, which fell nearly 6 points to 44.2 in January, had recovered a little in February to 46.1. Confidence among Spain's service sector providers, ranging from banks to cafes, fell to a survey low for the second month running in March.
"While still indicative of optimism, the Business Expectations Index eased to 57.1, from 59.2, and was well below the survey average of 72.1," said NTC. "Negative expectations were attributed to fears for the wider Spanish economy."
New orders fell in March at their sharpest rate in the history of the services survey and companies' costs continued to rise sharply, although the rate of input price inflation eased from February's 87-month high.
Spain on Monday reported a 4.6 percent inflation rate in March, fuelled by global food and fuel prices and raising the prospect of continuing strong inflation during a year of sharp economic slowdown. In other words, in the very best case the Spanish economy is now suffering from some form or other of stagflation. But if the deceleration continues at the present case worse may be to come, since stagflation in the context of a rapid fall in house prices and growing insolvency (both corporate and private) can rapidly - as we have seen in the Japanese case - convert itself into some form or other of endemic price deflation.
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