Consumption in Spain

Spain - Consumption

Second estimate revises Q2 growth marginally down to three-year low

Economic activity slowed slightly in the second quarter, according to a second GDP estimate released by the National Statistics Institute (INE) on 30 September. The economy grew a seasonally-adjusted 0.4% from the previous quarter in Q2, marginally down from both the 0.5% increase reported in the preliminary estimate and the revised 0.5% expansion recorded in Q1 (previously reported: +0.7% quarter-on-quarter). The second-quarter expansion marked the lowest reading since Q2 2016.

The moderation was driven by weaker domestic demand. Private consumption growth was flat in Q2 in quarter-on-quarter terms (previously reported: +0.3% qoq), easing from Q1’s revised 0.2% (previously reported: +0.4% qoq) amid a slowdown in employment growth. Meanwhile, public spending growth was revised up from 0.2% to 0.4% in Q2, but was still slightly below Q1’s revised 0.5% rise (previously reported: +0.4% qoq). Lastly, fixed investment fell 0.2% from the previous quarter (Q1: +1.4% qoq), reflecting a contraction in machinery and equipment investment.

On the external front, exports of goods and services recorded a strong performance despite flagging activity in the EU and global headwinds. Export growth in Q2 came in at 1.7% quarter-on-quarter, marginally down from the 1.8% previously reported but up from the revised 0.6% expansion logged in Q1 (previously reported: 0.0% qoq). Meanwhile, imports increased 0.9% (previously reported: +1.0% qoq), which was up from Q1’s slight rise of 0.1% (previously reported: -0.3% qoq).

Looking ahead, growth is seen easing this year as the business cycles matures and a deteriorating global economic environment weighs on the economy. In 2020, GDP is expected to slow further due to softer household consumption amid weakening employment growth, a slowdown in the tourism sector and waning investment activity. Moreover, mounting political uncertainty further clouds the short-term outlook, as the country is set to hold new elections on 10 November after the ruling Socialist party failed to form a new government.

The Central Bank expects the economy to grow 2.0% in 2019 and 1.7% in 2020. FocusEconomics Consensus Forecast panelists, meanwhile, project that GDP will expand 2.2% this year, which is down 0.1 percentage points from last month’s forecast. In 2020, panelists see the economy growing 1.8%, which is unchanged from last month.