Spain: Second estimate affirms solid growth maintained in Q3
January 3, 2019
Robust momentum was maintained in the third quarter of the year, according to a second GDP estimate released by the National Statistical Institute (INE) on 28 December. The economy grew a seasonally-adjusted 0.6% from the previous quarter in Q3, matching the preliminary estimate as well as the quarterly expansions recorded in the previous two quarters.
Domestic demand, underpinned by healthy household spending, was the engine of growth in Q3. Private consumption gained traction in Q3 after posting the weakest expansion in over four years in Q2, jumping 0.8% in quarter-on-quarter terms in Q3 from Q2’s flat reading. The positive performance came despite strengthening inflationary pressures eroding household purchasing power. Government consumption also gathered pace, increasing 0.8% over the previous quarter (Q2: +0.2% quarter-on-quarter). In contrast, fixed investment lost considerable steam in Q3 and expanded 0.8% quarter-on-quarter, significantly below the strong 3.0% expansion recorded in Q2. The deceleration largely reflected a marked slowdown of investment in machinery and equipment, and construction.
Meanwhile, a weak external sector weighed on the headline figure. Exports of goods and services contracted 0.9% from the previous quarter, following Q2’s 0.3% expansion and marking the first quarterly contraction in five years. Similarly, imports dipped 0.2% quarter-on-quarter in Q3, contrasting the 0.7% rise recorded in Q2. Given exports contracted at a much steeper rate than imports, the net contribution of the external sector to growth was negative.
Growth is set to decelerate next year due to a slowdown in domestic demand, although it should remain healthy nonetheless. Fixed investment growth is seen moderating on tightening financing conditions and a softening recovery in the housing market. Meanwhile, slowing employment gains due to lower tourist flows, combined with a minimum wage hike and a possible tightening of the labor code, could weigh on private spending. A sizable fiscal deficit together with a burdensome public debt also threaten the outlook.
Spain GDP Forecast
The Central Bank expects the economy to grow 2.2% in 2019 and 1.9% in 2020. FocusEconomics panelists project growth of 2.2% in 2019, which is unchanged from last month’s estimate, and 1.9% in 2020.