Oriol Aspachs (Caixabank Research) | Everything pointed to the Spanish economy’s growth rate continuing to be vigorous, as we have been pointing out in the pages of the CaixaBank Research Monthly Report over the last few months. Job creation shows no signs of slowing down and, in fact, accelerated in Q1 of the year. Business activity indicators have picked up, both in the services sector and in industry. Industrial production also picked up and household consumption is holding up. Even so, the GDP figure published by the INE has exceeded the most optimistic expectations. In Q1 2024, the Spanish economy’s quarterly growth rate reached 0.7%.
The figure shows a dynamic economy, especially if we take into account the context in which it is occurring. With the uncertainty generated by geopolitical tensions, an inflationary cycle that is slowing down but not yet over, and interest rates at their highest levels in more than 10 years. The main European economies, although they have quickened their pace in Q1, have maintained a much slower pace of growth than the Spanish economy, and this makes it even more remarkable.
When we look in a little more detail at the pillars underpinning growth, important nuances emerge. To a large extent, this is supported by the foreign sector and, more specifically, by the strong pull of exports of services, which grew by 11.1% and are already 37.0% above pre-pandemic levels. Given that import growth was more muted, the contribution of the external sector to economic growth was 0.5 p.p.
Domestic demand also played an important role. Of note in Q1 2024 was the step forward in investment, both in construction and in capital goods, with growth of 3.0% and 3.7%, respectively. Although in both cases they are still far from pre-pandemic levels, and last year they maintained a very weak profile, the recent turnaround is noteworthy. Household consumption came as no surprise and maintained a modest rate of growth of 0.3%, in line with what was anticipated by CaixaBank Research’s real-time consumption monitor. In any case, given the financial situation of households, which have a higher savings rate than usual, there is plenty of room for consumption to increase its growth rate in the coming quarters. This could happen when the ECB lowers interest rates and households perceive that the inflationary cycle has indeed come to an end.
The evolution of the different economic sectors has been very different in recent years. First the pandemic, and then the energy and inflation crises have affected them very differently. The latest available data show that the sectors that have performed best in recent years are still growing dynamically. For example, manufacturing industry advanced by 3.3% year-on-year and is already 7.0% above pre-pandemic levels. But, above all, the dynamism of services and, especially, information and communications, and professional, scientific and technical activities, which grew by 5.3% and 2.3%, respectively, and are already 19.6% and 10.1% above pre-pandemic levels, stands out.
The dynamism of these three sectors is particularly relevant, as they are the ones that usually show the highest productivity growth. Thus, while GDP growth per hour worked in the Spanish economy since 2014 has averaged around 0.5%, these sectors have shown a productivity growth rate of over 1% during this period.
The improved performance of the economy at the start of the year, together with the various factors that are driving it, will force us to improve CaixaBank Research’s forecast scenario in the near future. It currently forecasts growth of 1.9%. But after the publication of these figures, and if there are no new twists and turns in the international scenario, Spanish economic growth this year could be close to 2.5% and thus maintain a very similar rate of growth to last year.
