Spain: Second GDP release confirms economy's resilience in Q4
March 1, 2018
In the fourth quarter, the economy successfully defied fears of an abrupt slowdown in activity following a failed secession attempt in Catalonia, with the domestic economy recording a healthy pace of growth. According to more comprehensive GDP data released by the National Statistical Institute, economic growth was 0.7% from the previous quarter in Q4, matching the revised 0.7% increase recorded in Q3 (previously reported: +0.8% quarter-on-quarter) and the preliminary release for Q4 data. The fourth-quarter print drove full-year growth to 3.1% in 2017, a notch below the 3.3% increase recorded in 2016.
The domestic economy accounted for the lion’s share of the fourth quarter’s expansion, with solid employment growth and low borrowing costs offsetting feeble real wage growth and fueling another strong expansion in household spending. Although it decelerated for a second consecutive quarter, private consumption growth was still robust at 0.6% in quarter-on-quarter terms (Q3: +0.7% qoq). Fixed investment fared somewhat worse, growing 0.7% in Q4 following a 1.4% increase in the previous quarter. The expansion reflected weaker equipment and machinery investment and a contraction in intellectual property investment, which outstripped stronger construction investment. Meanwhile, government consumption growth was stable at 0.4% in the fourth quarter.
On the external side of the economy, export growth halved to 0.3% in Q4 following a 0.6% increase in Q3 due to a decline in service exports and weaker growth in overseas shipments of goods. Meanwhile, import growth ran aground in the fourth quarter, recording no growth after a solid 1.0% sequential increase in the third quarter. Stagnant growth in imports and a weak expansion in exports saw the external sector recording a net contribution to overall growth of 0.3 percentage points, which contrasted the 0.3 percentage-point deduction recorded in the previous quarter.
Incoming data indicates that economic growth was similarly robust early in the year. Employment growth was very solid in the first two months of the year, while PMI readings showed a broad-based improvement in business conditions in the same period. The economy is benefitting from carryover effects stemming from last year’s robust performance, as signaled by the country’s outstanding resilience to consequential political challenges. Spillover effects from last year, coupled with solid job creation, accommodative monetary conditions and sustained global demand, should buttress the economy this year, with growth expected to decelerate only slightly.
Spain GDP Forecast
The Central Bank expects the economy to grow 2.4% in 2018 and 2.1% in 2019. FocusEconomics Consensus Forecast panelists project that GDP will expand 2.7% this year, which is unchanged from last month’s forecast. In 2019, panelists expect the economy to expand 2.2%.
Author: David Ampudia, Economist