Spain: Economic growth stalls in third quarter
November 17, 2010
In the third quarter, gross domestic product remained flat over the previous quarter in seasonally adjusted terms, according to the data released by the National Statistics Office (INE) on 17 November. The reading came in below the 0.3% expansion recorded in the second quarter but was in line with market expectations. On an annual basis, the economy expanded 0.2%, which was up from the flat reading registered in the second quarter. The stagnation in the third quarter was driven by a slump in the domestic sector, which offset an improvement in the external sector. Private consumption contracted 1.1% over the previous quarter (Q2: +1.5% quarter-on-quarter), due to the July VAT increase. Gross fixed investment contracted 2.9% over the previous quarter (Q2: -0.6% qoq). On the other hand, the net contribution from the external to overall economic growth improved, as exports only decelerated while imports contracted. Exports of good and services increased 0.1% over the second quarter (Q2: +1.4% qoq), while imports contracted 5.0% (Q2: +3.6% qoq). At the sector level, the third quarter reading reflected positive growth in the services and energy sectors, while economic activity in agriculture, industry and construction contracted over the previous quarter. The Spanish Central Bank anticipates the economy to contract 0.4% this year but to return to growth in 2011 with a 0.8% expansion.