Spanish GDP slows more than expected

spanish GDPThe upturn in the Spanish economy and the recovery in consumption over the course of 2021 should be accompanied by a gradual recovery in the prices of goods and services

Bankia Estudios | Spanish GDP slows more than expected. The provisional GDP data for Q219 has disappointed, by registering a quarterly growth of 0.5%, one tenth below our forecast and the Bank of Spain´s estimate.

The weakness the national accounts show is fruit of the deterioration in domestic demand, especially productive investment, which is affected by the uncertainty, both in international markets deriving from Brexit, the increase in protectionism and the weakening of our main partners, and domestically from the political situation. On the upside, external demand improved, although largely to the weakening of imports.

We maintain our scenario for the next few months of a gradual slowdown, to the extent that the impact of the measures which have driven family incomes (salaries, pensions …) weakens. As a consequence, the increase in GDP for the year as a whole will be around 2.2%, compared to 2.6% in 2018.

The loss of dynamism in GDP in quarterly terms is fruit of the weakening in domestic demand, which has reduced its contribution 4 tenths to 0.2%, the worst registered in 6 years. This poor performance was partially balanced by the improvement in external demand (0.3 points vs 0.1% in January-March:

• Within domestic demand, both components have deteriorated compared to the previous quarter, especially investment (gross fixed capital formation), which contracted two tenths, correcting the string increase in the previous quarter (1.4+%), weighed down by the equipment goods sector (-2.6% vs +4.3%), while investment in construction recovered from its previous slowdown (+1.3% vs +0.2%). Spending on consumption, by both households and public administrations, slowed, one and two tenths to 0.3% and 0.2%, respectively.
• In the case of external demand, after the stand still at the beginning of the year, both imports (+1% vs -0.3%) and, above all, exports (+1.8%, the largest increase in two and a half years) have recovered.

GDP growth is 2.3% yoy, one tenth less than the previous quarter. Give that the lack of vigour in the activity of our Eurozone partners has been the same, to 1.1% yoy, the differential in Spain´s favour remains, since the end of 2018, at two year highs (1.2 points).

In the labour market, the rate of employment creation has slowed three tenths, both in quarterly terms (to 0.4%) and yoy (to 2.5%). Thus in the last year more than 459.000 jobs equivalent to full time employment have been created to a total of 18.8 million, the highest level in a decade. By sectors, the largest proportion of jobs created in the last 12 months has been in the service sector (+389,200 and +2.8%); on the other hand, although the most intensive relative increase in job creation has been in construction (+5.9%), this rate is almost half that of the previous two quarters.

Given the evolution of GDP and employment, the apparent productivity per equivalent full-time job fell for a third quarter, 0.2% yoy. On the other hand, given that the number of hours effectively worked grew only 1.4%, well below job growth, so that productivity per hour worked recorded positive rates for the first time since Q118 (+0.8% vs the previous -0.4%).

If the accelerated trend in wage increases, which rose two tenths to 1.8% yoy, is added to the prolonged deterioration in productivity per full time job equivalent, the unitary labour cost has stabilised its growth in decade long highs (+2.1%).

Lastly, the growth of nominal GDP remains 3.3% yoy, as a consequence of the slight acceleration in the implicit deflator (+1.0% vs the previous +0.9%).

About the Author

Shaun Riordan
Shaun Riordan is Director of the Department for Diplomacy and Cyberspace in the European Institute of International Studies and a senior visiting fellow of the Netherlands Institute of International Relations, “Clingendael”. He is also an independent geopolitical risk consultant. A former British diplomat, he served in New York, Taiwan, Beijing and Madrid, as well as the departments of counter-terrorism and the Eastern Adriatic in the Foreign Office. Shaun has taught at diplomatic academies in the Dominican Republic, Spain, Armenia and Bulgaria. He is the author of “Cyberdiplomacy: Managing Security and Governance Online” (Polity, 2019), “Adios a la Diplomacia” (Siglo XXI, 2005) and “The New Diplomacy” (Polity, 2003). He maintains a blog ( and can be followed at @shaun_riordan