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The economy grew 0.1% in the third quarter as consumption held up despite inflation

The economy expanded 0.1% in the third quarter, a tenth less than expected, as consumption resisted a hit to inflation compared with the April-June period. GDP (gross domestic product) data from July to September confirms a slowdown in activity in Spain, although it also reflects the momentum of the first full tourist season since 2019 without restrictions due to the COVID pandemic.

Second-quarter GDP rebounded by 2% (five-tenths more than the 1.5% advance), led by major eurozone economies and above forecasts. The stagnation of the third quarter was expected, but the trend is positive despite the uncertainty due to the energy crisis and the Russian invasion of Ukraine.

INE revised figures from previous quarters and overall growth in 2022 is already at 4.4%, in line with the government’s official forecast, which has acknowledged for weeks that activity will pick up further at the end of the year.

“INE has revised the GDP growth in the first three quarters of 2022, which puts the whole year above the forecast of the executive and other analysts and institutions”, defend the sources of the Ministry of Economy, who explain that “these revisions mainly respond to the adjustment of seasonal factors caused by the pandemic After the situation.”

In this way, the recovery of the economy is approaching pre-Covid levels. GDP will already be only 1.4 percentage points higher than in the fourth quarter of 2019, as the chart shows. France, Italy and Germany completed the reconstruction before that.

Total consumption, including administrations, other establishments and households, rose 0.5% from July to September, compared with the previous quarter, with household spending rising barely 0.1% in months when price increases were more abrasive.

Business investment suffered much more, and only investment related to intellectual property increased compared to the second quarter. Exports of goods and services, which include tourism, rose 1.5% during Spain’s high season, the first without restrictions due to COVID since 2019.

“The tourism sector has had a spectacular ‘boom’, but the industrial sector is also doing well and exports have been very strong,” First Vice President and Minister of Economy Nadia Calvino defended. And he adds that employment is resisting and that every month “the position of our country in this very difficult context is strengthened”.

There will be no recession in Spain

That same week, the Bank of Spain ruled out a recession in Spain in its central scenario, neither technical (two consecutive quarters of decline) nor much deeper.

The institution raised its GDP (gross domestic product) growth forecast to 4.6% in 2022 and reduced it by one-tenth to 1.3% in 2023. This expectation is lower than the government’s 2.1%. In 2024, the growth rate of activity will accelerate to 2.7%, according to its quarterly report on the Spanish economy, published this Tuesday.

As for prices, the Bank of Spain is cutting inflation by seven-tenths to 4.9% next year due to falling energy (oil, gas, electricity…) and executive measures. However, it still sees 3.6% in 2024, up seven-tenths from October’s figure, assuming the government withdraws those very shock measures. And this will momentarily reduce the disinflationary trend of the last quarter of 2023.

Measures such as gas curbs, transport discounts, tax cuts or various forms of assistance for companies or households that together support a reduction in the CPI (Consumer Price Index) by four points annually, from 10.8%. in July to 6.8% in November, according to INE data. In this last month alone, the executive’s measures would have “reduced the inflation rate by two points,” Angel Gavilan, director general of economics and statistics, said this Tuesday.

Source: El Diario





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