Spain: Economy continues to grow in Q3 but surprises markets on the downside
October 29, 2021
According to a preliminary reading, GDP rose 2.0% on a seasonally-adjusted quarter-on-quarter basis in the third quarter, undershooting market expectations of a 2.7% increase and following the 1.1% rise recorded in Q2. In year-on-year terms, the economy grew 2.7% in Q3, moderating significantly from the 17.5% jump recorded in Q2, although it had benefited from a very low base effect.
A notable improvement in foreign demand drove the third quarter’s reading. Exports of goods and services rose a strong 6.4% in seasonally-adjusted quarter-on-quarter terms (Q2: +0.9% s.a. qoq) thanks to a robust hospitality sector, which benefited from rising tourist inflows. Imports, meanwhile, were up a timid 0.7% in quarterly terms (Q2: +4.2% s.a. qoq), highlighting softening domestic activity.
Indeed, domestic demand weakened considerably in Q3. Private spending dropped 0.5% on a quarterly basis, swinging from the 4.7% increase logged in Q2, likely due to rising inflation and soaring energy prices eating into consumers’ pockets. Meanwhile, government consumption increased 0.1% from the prior quarter (Q2: +0.9% s.a. qoq), while fixed investment rose 1.3% as investment in tangible fixed assets, housing, and machinery and equipment rebounded (Q2: -2.2% s.a. qoq).
The INE will release a second GDP estimate for Q3 on 23 December.