Spain: Economy decelerates amid shrinking exports
August 26, 2011
In the second quarter, GDP expanded 0.2% over the previous quarter in seasonally adjusted terms, according to more complete data released by the National Statistics Office (INE) on 26 August, which confirmed the advance estimate published on 16 August. The reading was down from the revised 0.4% expansion recorded in the first quarter (previously reported: +0.3% quarter-on-quarter), but matched market expectations. On an annual basis, the economy expanded 0.7% in the second quarter, below the 0.9% increase registered in the previous quarter. The deceleration in the second quarter was driven by a weaker external sector whereas domestic demand improved somewhat. Private consumption improved over the first quarter with a 0.6% expansion (Q1: 0.0% qoq), while government expenditure contracted 2.4% (Q1: +2.9% qoq) and gross fixed investment fell a softer 1.0% over the previous quarter (Q1: -1.6% qoq). Despite the contraction in exports of goods and services, which saw the net contribution from the external sector to overall economic growth shrink, net exports remain the only positive contributor to GDP growth. Exports dropped 1.9% over the first quarter (Q1: +5.9% qoq), the first contraction in two years, while imports fell a more notable 3.7% (Q1: +5.0 qoq). The Central Bank anticipates the economy to expand 0.8% this year, and to accelerate further to 1.5% in 2012. These projections are below government expectations of a 1.3% expansion this year and growth of 2.5% in 2012.