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Activity in Spain’s service sector was much stronger than expected in February, according to a closely-watched survey.

However, in a sign that businesses are yet to be completely convinced of the strength of demand in the economy, respondents remained reluctant to raise prices for consumers despite continuing rises in input cost inflation.

The purchasing managers’ index for Spain’s services sector jumped to 57.7 from January’s 54.2, its highest reading since August 2015 and comfortably ahead of the 55.2 predicted by economists.

Respondents reported expansion in every part of the sector except hotels and restaurants.

The PMI surveys, compiled by IHS Markit, survey firms on measures such as orders, hiring and inventories to give a picture of the overall health of the economy, and the results are seen as useful early indicators of economic growth. A headline number above 50 indicates expansion during the month.

The strong services reading brought the composite figure for the whole economy to 57.0, compared to an expected 55.

Andrew Harker, IHS Markit senior economist, said:

The Spanish service sector moved into a higher gear during February, seeing the fastest rises in new orders and busienss activity for a year and a half.

One lingering concern surrounds the ability of service providers to raise their selling prices in an environment where their own input costs are increasing sharply.

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