Spain: Growth slows in Q2 on weaker domestic demand
July 31, 2019
Economic activity moderated in the second quarter, according to an advance GDP estimate released by the National Statistics Institute (INE) on 31 July. The economy grew a seasonally-adjusted 0.5% from the previous quarter in Q2, easing from the robust 0.7% expansion recorded in Q1.
Waning domestic demand drove the overall deceleration. Private consumption softened slightly, expanding 0.3% quarter-on-quarter (Q1: +0.4% quarter-on-quarter) amid slower employment growth in Q2. Similarly, public spending growth dipped to a two-and-a-half year low (Q2: +0.2% qoq; Q1: +0.4% qoq). Meanwhile, fixed investment contracted 0.2% from the previous quarter (Q1: +1.4% qoq), mainly due to a marked fall in machinery and equipment investment.
In contrast, the external sector performed strongly, despite the wider pullback in the Eurozone. Exports of goods and services grew 1.8% quarter-on-quarter, marking the fastest clip in over two years, after having stagnated in the previous quarter. Imports, meanwhile, recovered and rose a solid 1.0% on a quarterly basis (Q1: -0.3% qoq).
Looking ahead, growth is expected to ease this year as the business cycle matures. Domestic demand is set to underpin overall activity, with sustained, albeit slightly slowing, job creation powering household spending. Political and policy uncertainty, a tourism industry which is past its peak and the possibility of a hard Brexit cloud the outlook.
The INE will release the second GDP estimate on 30 September.
Author: Javier Colato, Economist