Sectoral mark-up dynamics in Spain

In this paper we show that value-added mark-ups tend to be pro-cyclical in manufacturing and counter-cyclical in market services. However, at the sectoral level value-added mark-ups may be misinterpreted if intermediate input variations are ignored. This is particularly true in the case of the manufacturing sectors, although less so in that of market services. In fact, this is the main explanation for the (pro-cyclical) behaviour of relative services-manufacturing mark-ups which, in turn, play an important role in their relative price dynamics of these sectors. In addition, fluctuations in demand also play a role. In the case of services, mark-ups depend negatively on current output and positively on future output ; hence in periods when demand is recovering (declining) mark-ups widen (narrow). By contrast, in the manufacturing sectors mark-ups depend positively on the current output gap and negatively on future expected demand, i.e. when demand is recovering (declining) current mark-ups fall (rise).[resumen de autor]