Spain: Second GDP release confirms healthy growth in Q1
May 31, 2018
The economy maintained a healthy pace of growth in the first quarter of the year, according to comprehensive national accounts data released by the National Statistical Institute (INE) on 31 May. The economy grew a solid seasonally-adjusted 0.7% from the previous quarter in Q1, matching the 0.7% increase recorded in Q4 and the preliminary release for Q1 data. The first-quarter print, which marked the third consecutive quarter of 0.7% growth, showed resilience amid a broader slowdown in the Eurozone.
Domestic demand was the main engine of growth in Q1. Private consumption grew at a robust 0.7% in quarter-on-quarter terms, slightly accelerating from the 0.6% increase recorded in Q4. Healthy employment growth and low inflation have boded well for real household incomes, fueling another strong expansion in consumer spending. Fixed investment also picked up steam in Q1, growing 0.8% from the previous quarter (Q4: +0.7 quarter-on-quarter). The acceleration reflected a rebound in investment in intellectual property and much stronger construction investment, which more than offset the sizeable contraction in equipment and machinery investment. Meanwhile, government consumption grew 0.5% over the previous quarter, marginally above the 0.4% rate in Q4.
On the external front, export growth accelerated to 1.3% in Q1 following a 0.3% increase in Q4, primarily due to a strong rebound in services exports. Meanwhile, imports grew 1.3% quarter-on-quarter in Q1, above the flat reading recorded in Q4. The identical pace of growth in imports and exports led the external sector to record a net contribution of 0.3 percentage points to overall growth, matching the result of the previous quarter.
Looking ahead, healthy private consumption growth should continue underpinning economic activity this year. However, available survey-data points to a slight moderation of growth in the second quarter. In addition, political uncertainty surrounding the outcome of the no-confidence vote against Prime Minister Mariano Rajoy on 1 June could trigger instability in financial markets, clouding the short-term economic outlook.
Spain GDP Forecast
The Central Bank expects the economy to grow 2.7% in 2018 and 2.3% 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 2.3%.
Author: Javier Colato, Economist