Spain: The economy that continues to silence the critics
One of the original PIGS, the Spanish economy continues to silence its critics, growing quarter after quarter. And in what is starting to become familiar territory for the Southern European country, the economy started 2017 off with a bang, dispelling fears of an abrupt slowdown in economic activity that some had expected due to the fading of several tailwinds.
The economy expanded 0.8% compared to the previous quarter on a seasonally adjusted basis, according to comprehensive data released by the National Statistics Office (INE) in late May, which came in above market expectations of a 0.7% increase.
Despite the mild expansion in private consumption in Q1, the domestic sector continues to pull its weight despite higher inflation and meager wage growth, highlighting the resilient dynamics of Spanish households. Government consumption swung from contraction in the last quarter of 2016 to expansion in Q1 while fixed investment sped up markedly from Q4 to Q1 and represented the highest reading in nearly two years.
However, the star of the show was most definitely the external sector. Export growth was the best since Q1 2007, showcasing the improved competitiveness of Spanish exports and import growth was the strongest since September 2009. Overall, the net contribution of trade to overall growth improved from plus 0.7 percentage points in the fourth quarter of last year to plus 1.1 percentage points in the first quarter of this year.
On an annual basis, Spanish GDP rose 3.0% at the outset of the year, which mirrored the reading observed in the previous quarter. The economy’s still solid performance should ensure Spain remains one of the fastest-growing economies in the Eurozone for a third consecutive year.
Taking a look at the graph above, FocusEconomics does expect a moderation in economic growth as several of the tailwinds that boosted its recovery in recent years fade away. Nonetheless, the expected slowdown seems to have been sidestepped and the Spanish economy is now showing strong signs of resilience if not even outright higher growth. The FocusEconomics Consensus Forecast for this year has been revised up 0.4 percentage points since the start of the year as our analysts have been gradually raising their projections, both annually and quarterly. The Spanish Ministry of Economy also recently stated that, according to their own projections, growth in Q2 is expected to surpass the 0.8% recorded in Q1.
All in all, momentum in the economy seems to be picking up despite the deceleration in private consumption growth, which is to be expected considering higher inflation and energy prices and only moderate wage growth. This is particularly true in investment, as a relatively more benign political backdrop and a strengthening housing sector both benefit an acceleration in capital expenditure and exports, as global demand, particularly among emerging markets, is on the rise.
Despite the positive news, some might point out that the unemployment rate is still high, while the average monthly salary is only EUR 1400 per month. Nonetheless, the gains made in reducing unemployment in recent years have been highly significant and have proved a boon to households in the face of mediocre wages. Coupled with negative changes in consumer prices during the 2014-2016 period, Spaniards have managed to pull their weight remarkably well. Nonetheless, still-low financing costs and forecasts of a further improvement in the jobs market will see disposable income for 2017 coming in at a faster clip than last year (disposable income, which FocusEconomics uses instead of average salary, allows for better comparisons across countries and is thus our preferred indicator), while other sectors have started the year with a stronger performance than in 2016. All in all, while the unemployment and average wage figures by themselves don’t look great, one only has to look at the trend and the "Spanish inertia" to see that these are clear signs of an improving economy.
FocusEconomics Consensus Forecast panelists have revised their projections upwards several times this year as the economy continues to perform better than expected, and now project that GDP will expand 2.7% in 2017, which is unchanged from last month’s forecast and up 0.4 percentage points from January’s projection. In 2018, panelists expect the economy to expand 2.2%.
5-year economic forecasts on 30+ economic indicators for 127 countries & 33 commodities.
Author: David Ampudia, Economist
Date: June 9, 2017
TagsIndia Precious Metals Commodities Gold Germany Healthcare Canada Unemployment rate OPEC USA France Colombia TPP Energy Commodities Banking Sector Latin America South Africa Major Economies Inflation Italy Euro Area Eastern Europe Iran Base Metals Commodities European Union Ukraine UK IMF Commodities United Kingdom Oil Portugal Trade Bitcoin Japan Forex Agricultural Commodities Venezuela China Brexit Infographic Emerging Markets Africa Housing Market precious metals Turkey G7 Vietnam Mexico Greece United States Australia Russia oil prices MENA Argentina Asia Sub-Saharan Africa Spain Tunisia Exchange Rate Company News Brazil Cryptocurrency Economic Growth (GDP) Investment Consensus Forecast Nordic Economies
The most recent estimates suggest that the Angolan economy is getting back on its feet. Read more: https://t.co/E1QrCcf8pe
10 hours ago
India is projected to grow 7.3% in FY 2018 and 7.4% in FY 2019. https://t.co/JNeqoY4fcN
11 hours ago
How will general elections in Malaysia affect the economy in 2018? Find out: https://t.co/wxJTHWfmrk
12 hours ago
Incoming economic data remains largely encouraging in India. Read our latest economic outlook for India here:… https://t.co/WRPhonAiNx
12 hours ago
Tighter monetary stance and ebbing Chinese demand to cause growth to moderate in Malaysia this year. Read more: https://t.co/wxJTHWfmrk
13 hours ago
- What the TPP means for trade in Latin America
- How Student Loan Debt Affects the Economy
- Elections in Russia: Analysis and Implications
- 2018 & 2019 Economic Outlook for the Top Oil Producing Countries
- Nearly a Third of Latin Americans Have No Right to a Pension
- A Look at Healthcare Models Around the World
- The Poorest Countries in the World
- Newly-elected Chilean President Sebastian Piñera faces a myriad of challenges - economic and otherwise
- The Economic Effects of Trade Protectionism
- Regional Disparity: The Dark Side of Inequality in Latin America
- Coal: The story of the world's most abundant fossil fuel
- Venezuela's Electoral Conundrum
- Gold: The Most Precious of Metals (Part 3)
- Trump's 1st Year: 95 Analysts Surveyed on U.S. Economy
- The Latest on China and What's in Store for 2018
- An in-depth look at the Eurozone’s booming economy and the challenges that lurk in the shadows
- China’s growing influence on the Latin American economy
- Top Economics & Finance Blogs of 2018
- How Latin America emerged from recession in 2017
- Is this the beginning of the end for Bitcoin?
- Risks and Opportunities for 2018 - Daniel Lacalle
- Emerging Markets 2018 Economic Outlook
- The role of FDI in Vietnam’s socio-economic development
- Increasing poverty in Latin America takes a breather thanks to improving economic dynamics
- What will be the most miserable economies in 2018?
- The World's Top 10 Largest Economies
- Is Spain doing enough to address its high youth unemployment rate?
- Has Latin America gone far enough in reducing barriers to international trade?
- Commodities Outlook: Oil, Natural Gas, Coal, Lead & Tin
- 21 experts tell us what the future looks like for cryptocurrencies and blockchain
- Turkish lira plummets to all-time low on Erdogan’s monetary feud and tense U.S.-Turkey relations
- Copper: The first metal mastered by man
- The Mercosur-EU Free Trade Agreement: Obstacles & Opportunities
- Nigerian Economy Still Treading Water Thanks to Oil Sector
- Elections in Chile: What the results could mean for the economy
- QE’s Untold Story: A Chart That Fed Correspondents Need To Investigate
- Holland’s fragile one-seat majority government targets economic growth at the expense of fiscal sustainability
- South Africa: Economy at a tipping point?
- Latin American Commodities: What’s behind the increase in demand and prices?
- Is the UK really "shackled to a corpse"?
- Spain-Catalonia: 7 economic experts weigh in on how the situation will affect the outlook
- How well is Spain's labor market doing since the crisis?
- Which countries will have the highest and lowest inflation in 2017?
- How vulnerable is Latin America to economic crises today?
- Iron ore facts and common questions answered
- The bulging economic costs of obesity
- How much investment is needed to salvage Latin America’s crumbling infrastructure?
- A Look at the Potential Impact of Brexit on the Dutch Economy
- Emerging Markets Are Kicking Into Higher Gear In 2017
- Why is foreign direct investment in Latin America falling again?
- Are Central Banks Nationalising the Economy?
- Bounty or burden? The impact of refugees on European economies is far from clear
- What’s the future of U.S.-Latin America trade relations?
- Taxes or cutbacks? Latin America's challenge of sustaining spending without causing debt to skyrocket
- Are uranium prices making a comeback?
- Taxing the Economy: Achieving a Delicate Balance
- How will emerging market economies perform in 2017?
- How will Latin America’s upcoming lengthy election cycle affect the reform agenda and credit ratings?
- Chilean Economy in Focus: Interview with Senior Economist of the Chamber of Commerce of Santiago
- CEOs Rank Top Economies for Growth Opportunities
- The Mobile Ecosystem & Latin America's Economy
- Prospects and Challenges for the Global Economy: Interview with Tim Cooper from BMI Research
- How will the Fed reduce its balance sheet & and how will the ECB end QE? - 19 economic experts weigh in
- Thoughts on "unwinding" QE from Frances Coppola
- The Fed and ECB at a crossroads: Unwinding QE
- Spain: The economy that continues to silence the critics
- Latin America: The Most Unequal Region in the World
- The History of OPEC: Has it been a Success?
- FocusEconomics Announces 2017 Analyst Forecast Awards Winners
- Latin America’s rising unemployment bucks nearly decade long trend
- Escape from the Central Bank Trap by Daniel Lacalle
- China's economic rebalancing act: What to look out for in 2017
- Driving Growth in Latin America: Challenges & Priorities
- Is the Global Economy Rebalancing?
- Commodity exporters face challenging times
- Recent Global Events Facilitate Mercosur-Pacific Alliance
- 23 economic experts weigh in: Why is productivity growth so low?
- Mexico's outlook as Trump nears 100-day mark
- Interview with Oxford Economics Senior Economist on implications of the possible outcomes of the French Presidential Election
- The anxiety of the small saver in a world of negative interest rates
- Brexit negotiations. Between Uncertainty and Urgency
- An Economic History of the EU from El Blog Salmón
- Baby Boomin': Implications of high population growth in Latin America
- Survey of International Economists Predicts a Le Pen Defeat in French Elections, Says Macron has Best Economic Plan
- Spain in a global context: developed economy with some challenges
- How much is crime costing Latin America?
- Predictions & Estimates from Economist Daniel Lacalle
- What economy will the new Dutch government inherit?
- “The data is not a true reflection of reality in India” Interview with Société Générale India Economist
- What are the prospects for Emerging Economies in 2017?
- What to expect in Asia for 2017
- Top Economics & Finance Blogs of 2017
- Latam to Resume Moderate Growth in 2017 but Important Risks Plague Outlook
- 4 Key European Elections That Will Impact the Economy in 2017
- How are security concerns and political chaos affecting Turkey’s economy?
- Global growth to edge up in 2017
- Set to breach targets again? Debt and deficit outlooks for Southern European Eurozone countries in 2016 & 2017
- What does Donald Trump mean for the U.S. economy?
- How will emerging markets perform in 2017?
- The economic impact of a break in U.S.-Philippines ties
- Trump election: Base metals surge due to infrastructure plan
- 5 updates on the Venezuelan economic crisis
- Canada: When your neighbor’s house is on fire…
- Short-term pain before long-term gain? A look at French labor reform and economic growth
- Asia: Unremarkable growth & unfulfilled promises?
- How India's latest monsoon is affecting the economy
- Innovation in Latin America: Potential Goes Untapped Due to Weak Economic Conditions
- Russian economy update in wake of OPEC deal announcement
- The Wisdom of the Crowds and the Consensus Forecast
- Can the peso predict the U.S. election results?
- There's no end in sight to the Venezuela crisis
- A Look at the European Union Political Calendar
- Survey of international economists shows uncertainty surrounding elections damaging U.S. growth prospects
- FocusEconomics partners with leading online statistics provider Statista
- Sub-Saharan Africa's 2016 & 2017 growth rates
- China: Recent postive economic data may be papering over the cracks
- The Italian Dilemma: Weak banks pose risk to already faltering domestic demand
- How much money do migrants from Latin America send home?
- The U.S.' (Not So) Mysterious Case of the Missing Men
- What to expect from the G20 economies by 2020
- The Pain in Spain: Robust GDP growth cannot mask the persistent structural deficit