GDP per capita in Spain

Spain - GDP per capita (Euros)

Growth holds steady in Q3 on solid domestic demand

Economic activity held steady in the third quarter, according to an advance GDP estimate released by the National Statistics Institute (INE) on 31 October. The economy grew a seasonally-adjusted 0.4% from the previous quarter in Q3, matching Q2’s expansion and coming in line with market expectations.

The reading reflected sturdy demand at home which more than offset a weak external sector. Private consumption picked up steam, growing 1.1% quarter-on-quarter—the strongest expansion in over two years (Q2: 0.0% quarter-on-quarter). In addition, fixed investment increased 1.3% amid a jump in machinery and equipment investment, rebounding solidly from Q2’s 0.2% decline. For its part, public spending growth quickened to an over four-year high (Q3: +0.9% qoq; Q2: +0.4% qoq).

In contrast, the external sector struggled amid subdued Eurozone demand. Exports of goods and services fell for the first time in a year (Q3: -0.8% qoq; Q2: +1.7% qoq), while imports rose a solid 1.3% on a quarterly basis (Q2: +0.9% qoq). Taken together, net trade significantly subtracted from overall growth after having contributed positively to Q2’s showing.

Looking ahead, the economy is projected to lose momentum next year. In particular, slower employment gains are seen weighing on household spending, which has underpinned growth in recent years. Moreover, with the 10 November election likely to yield yet another fragmented Parliament, political instability and policy inaction pose downside risks to outlook, as do a cooling tourism industry, Brexit-related uncertainties and the challenging global trading environment.

The INE will release the second GDP estimate on 30 December.

The Central Bank expects the economy to grow 1.7% in 2020 and 1.6% in 2021. FocusEconomics Consensus Forecast panelists project that GDP will expand 1.7% next year, which is down 0.1 percentage points from last month’s forecast. In 2021, panelists also see the economy growing 1.7%.