Spain: Economic growth remains robust in Q4
March 2, 2017
The Spanish economy ended 2016 on a positive note, buttressed by a well-performing domestic market and upbeat sentiment among exporting sectors. The economy expanded 0.7% compared to the previous quarter on a seasonally-adjusted basis, according to comprehensive data released by the National Statistics Office (INE) on 2 March. The expansion matched both the third quarter reading and FocusEconomics panelists’ expectations, rounding off yet another year of remarkable performance for the Spanish economy.
The domestic sector remains the cornerstone of Spanish economic growth. Household spending continued to benefit from a steady pace of job creation and favorable financial conditions. As a result, private consumption rose 0.7% in Q4, slightly above the 0.6% increase observed in the previous quarter. Fixed investment swung from a 0.1% contraction in the third quarter to a 0.5% expansion in the fourth quarter. Although a lack of structural reforms continues to weigh on business prospects, the solid performance of the manufacturing sectors, encouraging economic sentiment and the forming of a government in late October were behind Q4’s upswing in fixed investment, particularly in the construction sector. Conversely, government consumption disappointed in the final quarter of the year, dropping from a 0.5% rise in Q3 to a 0.2% decline in Q4.
The external side of the economy recovered some lost ground in the fourth quarter. Exports jumped from a 1.2% contraction in Q3 to a 2.0% increase in Q4, aided by both an upswing in exports of goods and a stronger performance among service providers. Imports fared similarly, driven by higher prices for energy (Q3: -2.0% quarter-on-quarter; Q4: +1.8% quarter-on-quarter). As a result of exports growing faster than imports, the net contribution of trade to overall growth improved from plus 0.5 percentage points in the third quarter to plus 0.7 percentage points in the fourth quarter.
On an annual basis, GDP rose 3.0% in the fourth quarter, which was slightly below the 3.2% reading observed in the previous quarter. Nonetheless, the economy’s still solid performance kept Spain as one of the fastest-growing economies in the Eurozone for a second consecutive year. For the year 2016 as a whole, the economy grew 3.2%, which matched the previous year’s figure. Both years have marked the largest economic expansion since 2007.
Author: David Ampudia, Economist