Spain: The economy enters 2019 on solid footing
April 30, 2019
Economic activity picked up at the start of the year, according to an advance GDP estimate released by the National Statistical Institute (INE) on 30 April. The economy grew a seasonally-adjusted 0.7% from the previous quarter in Q1, accelerating from the 0.6% expansion recorded in Q4 and showing resilience yet again amid the slowdown gripping the Eurozone.
Both domestic and external demand contributed to Q1’s expansion. After a 0.2% quarter-on-quarter contraction in Q4, fixed investment recovered in Q1, advancing a solid 1.5% in quarter-on-quarter terms on the back of a strong rebound in machinery and equipment investment. That said, private consumption slowed, albeit slightly, expanding 0.3% quarter-on-quarter (Q4: +0.4% quarter-on-quarter), while government spending growth held steady in the quarter (Q1: +0.4% qoq; Q4: +0.4% qoq).
Meanwhile, although the external sector fared relatively well, this was mainly due to a decline in imports amid softer consumer demand. Imports of goods and services dipped 1.1% on a quarterly basis, following muted growth in Q4 (Q4: +0.0% qoq) and marking the sharpest fall in over eight years. Exports also contracted in Q1, albeit to a lesser extent than that of imports (Q1: -0.5% qoq; Q4: +0.7% qoq).
Going forward, although growth is seen easing this year amid the maturing business cycle, it should remain healthy and above that of the major Eurozone economies. Household spending, buttressed by sustained job creation and gradually rising real incomes, is expected to underpin overall activity. A tourism industry which is past its peak and heightened political uncertainty are key downside risks to the outlook.
The INE will release the second GDP estimate on 28 June.
Author: Javier Colato, Economist