Spain maintained growth in fourth quarter, showing momentum

The Spanish economy maintained the pace of growth in the fourth quarter, pointing to further momentum for the Iberian nation’s recovery.

Gross domestic product increased 0.8 percent in the three months through December, unchanged from the previous quarter, the Madrid-based National Statistics Office said Friday in a preliminary release. Economists had forecast a 0.8 percent expansion, according to the median of 16 estimates in a Bloomberg News survey. 

From a year earlier, GDP expanded 3.5 percent, beating estimates calling for growth of 3.4 percent. Overall the economy grew 3.2 percent in 2015. The Spanish government targeted growth of 3.3 percent.

Boosted by reforms, the European Central Bank’s unprecedented stimulus program and cheaper oil prices, Spain is expected to outpace more than half of the other euro-area nations this year. The European Commission predicts the nation’s economy will grow 2.7 percent in 2016 compared with 1.8 percent for the 19-nation region. 

While the Spanish report didn’t break down components of GDP, economists see consumers as the main driver of the recovery, benefiting from improved financing conditions, faster job creation and renewed confidence. Even as consumption pushes ahead, economists see external tailwinds and the impact of reforms wearing off as the year progresses, moderating the pace of expansion.

“We think Spain reached a sweet-spot over the summer, you had a credit impulse from the ECB coupled with the implementation of reforms that paid off,” said Goldman Sachs senior European economist Andrew Benito in an e-mail before the data were released. “As you get beyond that peak, we think the rate of growth is set to moderate this year to 2.5 percent.”

A separate release showed consumer prices on an EU-harmonized basis fell 2.5
percent in January, according to preliminary data. From a year ago, consumer prices were down 0.4 percent. Spanish unemployment fell the most in almost five years in the fourth quarter, having added more than half a million new jobs in 2015, according to a report released Thursday.

While the economic outlook looks bright, officials in Madrid are struggling to end a political deadlock after an inconclusive election last month. With Acting Prime Minister Mariano Rajoy running short of allies after losing his overall majority, his main rival - Socialist leader Pedro Sanchez - is struggling to form an alternative majority. If no government can be formed, the nation could be heading for new elections in the spring.


Source: Bloomberg