Spain: Second GDP release confirms robust momentum in Q3
November 30, 2017
The economy continued to perform robustly in the third quarter, with stronger dynamics in the domestic sector offsetting stagnant growth in the external sector. According to more comprehensive GDP data released by the National Statistics Office (INE) on 30 November, seasonally-adjusted quarter-on-quarter growth was 0.8% in Q3, unchanged from the preliminary estimate and only marginally below the 0.9% increase recorded in Q2. On an annual basis, growth was confirmed at 3.1% in Q3, unchanged from the reading in Q2.
A breakdown by components showed the domestic sector contributed more to growth in Q3 than in the previous quarter. The pick-up was mostly attributable to faster growth in fixed investment, which in turn was led by higher capital expenditure in equipment and intellectual property products. The former was likely buttressed by upbeat operating conditions in the manufacturing sector and healthy industrial output through the quarter. Fixed investment grew 1.3% from the previous quarter in Q3, more than doubling the 0.6% quarter-on-quarter increase recorded in Q2. Elsewhere in the sector, government consumption was steady in Q3 at Q2’s 0.4% rise, while private consumption posted a second consecutive quarter of growth at 0.7%, supported by an improving labor market and accommodative credit conditions.
The external sector’s performance was less upbeat. Exports were unchanged from the previous quarter in Q3, a notch below the already tepid 0.1% expansion recorded in Q2. Imports experienced no growth in Q3, which followed a 0.7% contraction in Q2. Steady levels of exports and an improvement in imports meant the sector did not contribute to overall GDP growth in the third quarter, contrasting the robust 0.9 percentage-point contribution recorded in the second quarter.
The third-quarter figures were not impacted by the crisis that followed Catalonia’s contested independence referendum in October and suggest momentum in the Spanish economy persisted in the third quarter, boosted by upbeat momentum in the industrial sector and tailwinds for consumers. However, leading data for Q4 point to slightly slower growth on Catalonia-induced uncertainty: Retail sales recorded a noteworthy decline in October, with most of the weakness centered on sales in Catalonia, while recent services PMI data suggests demand is waning due to lingering uncertainty regarding the region’s bid for independence.
Spain GDP Forecast
The Central Bank expects the economy to grow 2.5% in 2018 and 2.2% in 2019. FocusEconomics Consensus Forecast panelists project that GDP will expand 2.4% next year, which is up 0.1 percentage points from last month’s forecast. In 2019, panelists expect the economy to expand 2.1%.
Author: David Ampudia, Economist