GDP growth records best result in a year in Q2

Spain remains regional outperformer: GDP growth picked up to 0.7% on a seasonally adjusted quarter-on-quarter basis in the second quarter, from 0.6% in Q1, the fastest increase since Q2 2024. The reading narrowly exceeded market expectations. Spain remained the fastest-growing large Euro area economy. On a seasonally adjusted year-on-year basis, economic growth was unchanged at 2.8% in Q2, matching Q1.

Household spending spearheads the improvement: Private consumption growth edged up to 0.8% on a seasonally adjusted quarter-on-quarter basis in Q2, up from 0.5% in Q1, boosted by lower inflation and the tightest labor market since the 2008 financial crisis. Moreover, public consumption contracted at a slower rate of 0.1% in Q2 (Q1: -0.5% s.a. qoq). Meanwhile, fixed investment growth softened to 1.6% in Q2, down from 1.9% in the previous quarter. As a result, domestic demand contributed 0.9 percentage points to the headline reading, up from 0.5 percentage points in Q1. On the external front, exports of goods and services increased 1.1% on a seasonally adjusted quarterly basis in Q2, down from the first quarter's 1.7% expansion, but remained robust, underscoring the resilience of tourism and the relative trade insulation from the U.S. Conversely, imports of goods and services growth accelerated moderately to 1.7% in Q2 (Q1: +1.5% s.a. qoq). Overall, external demand detracted 0.1 percentage points from the headline reading in Q2, reversing Q1’s 0.1-point contribution.

Momentum to remain upbeat: In light of Q2’s strong result several panelists have upgraded their 2025 GDP growth forecasts for Spain. Nonetheless, our Consensus is for sequential GDP growth to slow slightly in H2, curbed by higher U.S. tariffs and cooling growth in the tourism sector. Still, Spain will continue to grow robustly, supported by a historically tight labor market, ECB monetary policy easing and EU funds.

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