2023-07-28 11:56:59
The economy slowed down its growth in the second quarter, in which GDP increased by 0.4% year-on-year, one tenth less than in the first, and sustained by consumption despite high inflation and the rise in interest rates. Spanish GDP also grew thanks to the boost in exports and, in particular, the pull of the tourism sector, but with a cooling of the figures compared to the first three months of the year.
At the annual level the slowdown is more evident. From the 4.2% that the economy grew year-on-year in the first quarter, to the 1.8% that advanced in the spring (from April to June), according to the National Institute of Statistics (INE), which indicates that Economic activity was boosted in the second quarter of the year by both consumption and investment, given the decline in exports and imports.
Thus, the Spanish economy lost strength in the second quarter, contrary to what was expected by the Bank of Spain, which forecast growth of 0.5%, the same as in the first quarter. It is only one tenth less than the estimates of most organizations but it denotes a change in trend despite the fact that household consumption improved compared to the first part of the year, with growth of 1.6% after two negative quarters. In addition, public spending advanced by 1.5% compared to the decline of 1.6% in the first quarter.
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From the Ministry of Economy they value these data positively and highlight the “strength” of national demand and the improvement in investment in construction, capital goods and household consumption. Despite this, this growth of 0.4% is the lowest for a year. The same is true of year-on-year growth, which has not been below 2% since the lockdown due to the pandemic.
For Raymond Torres, Director of Economic and Economic Affairs at Funcas, Spain is benefiting “from the tailwind that comes from the change in the pattern of global demand towards tourist and non-tourist services, to the detriment of industrial goods.” Thus, the expert explains to this newspaper that GDP growth for 2023 will be higher than expected due to the drag effect that comes from the “strong boost in the first quarter” and we will be “clearly above 2%.” Government forecasts point to an increase of 2.1% of GDP this year, but organizations of the stature of the International Monetary Fund (IMF) gave support to the Spanish figures and calculated this week that growth will be 2.5% , one point above what was forecast just three months ago due to the pull of tourism.
“Our productive fabric is competitive in these service export sectors, generating a favorable growth differential compared to the European average,” says Torres. And although tourism is a growth engine, exports of non-tourism services also provide a plus.
In addition, the good performance of the labor market – the EPA has just confirmed that Spain has already surpassed 21 million Social Security affiliates – manage to sustain family consumption and keep the economy positive. The Bank of Spain indicated in a bulletin published this Thursday that employment growth is the lever that is maintaining family consumption and, with it, the economy. The Funcas economist warns that the main risk comes from the rise in interest rates, which “could cool demand in the second part of the year.”
Second Semester Cooldown
A slowdown that many organizations are already contemplating, from the Bank of Spain to the Institute for Economic Studies (IEE), which in its forecasts presented this week assured that economic growth will cool off in the second part of the year. Although he improved his GDP forecast for this year to 2.2%, he warned of a “notable slowdown” in the second semester that will lead the country to advance only 1.5% in 2024, an “insufficient” rate to reduce unemployment. .
The macroeconomic figures continue to do quite well despite this slowdown shown by the INE for the second quarter, but families are unable to transfer these improvements to their daily economy. Raymond Torres explains that the households that have managed to get out of a situation of unemployment due to the good progress of the labor market have benefited, but he acknowledges that the majority of families have noticed a “notable loss of purchasing power” as a result of the inflation. “Consumption has suffered, which is why many people are not perceiving the improvement in GDP,” says Torres.
In fact, the employment data shown by the INE continue to be very positive. The number of hours worked increased by 1.3% compared to the first quarter, which translates into the creation of 546,000 full-time jobs in the last year, reveals Statistics.
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