Madrid: Spain’s economy grew strongly in the second quarter as consumer spending stayed robust and demand for its exports rose, though there were signs that a buoyant investment climate may be starting to sag after months of political uncertainty.
Its economic rebound has progressed virtually unscathed through eight months without a functioning government, as the country has continued to notch up one of the fastest growth rates in the Eurozone this year.
Thursday’s final data from National Statistics Institute INE showed quarter on quarter GDP growth of 0.8 per cent, keeping pace with the first quarter and up a tenth of a per centage point from a preliminary estimate.
Consumer spending grew 3.6 per cent year on year as people who kept their jobs through a recession that ended in 2013 took advantage of better times to buy big-ticket goods like washing machines.
Exports of services also performed well, INE said, even outside the tourism sector which has been boosted by record numbers of visitors this summer.
After two inconclusive national elections in December and June, the spectre of a third looms.
Politicians last week inched closer to ending the impasse when the People’s Party of acting Prime Minister Mariano Rajoy agreed terms to negotiate a pact with a smaller rival, Ciudadanos.
If the agreement is sealed, Ciudadanos will back Rajoy in a parliamentary confidence vote on August 31 on forming a government. But even then Rajoy would still be short of the majority he needs, raising the possibility of third ballot in December unless others also agree to back him or abstain.
While fallout for gross domestic product so far has been slight, the political deadlock has triggered concerns that companies might delay expansion plans.
Government investment
A slowdown in manufacturers’ investment in equipment and machinery extended into the second quarter, the INE data showed, when it grew at 7.8 per cent year-on-year against 9.3 per cent in the previous three months and almost 11 per cent in the last quarter of 2015.
In a possible sign of the impact on government investment, spending on public works contracts slumped by a fifth in the first quarter, separate data showed on Tuesday, as decisions on infrastructure projects like roads, ports and trains were deferred.
On an annual basis the economy grew by 3.2 per cent in the second quarter, INE said — below the 3.4 per cent growth rate of the first but in line with a preliminary estimate.
Spain’s economy is still expected to expand at one of the fastest rates in the Eurozone this year — at 2.9 per cent, according to the acting government — though scrutiny is growing over whether that will be enough to reach deficit targets without spending cuts.
Gross debt rose to a record high €1.1 trillion (Dh4.6 trillion, $1.24 trillion) in June, Bank of Spain data showed on Wednesday, which the economy ministry said was equivalent to 100.9 per cent of national output — well above 2016 goals.
