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Consumption drives Spain's economy to 1.0 percent growth in second quarter

August 27, 2015   |   Madrid

By Elisabeth O'Leary

That improved from a 0.9 percent reading in the first quarter and could mark the high point of growth, according to some economists. The final data from statistics institute INE was in line with forecasts.

 

The conservative government, hopeful that the pick-up in the economy will be a decisive factor in a national election due by year end, expects full year growth of 3.3 percent.

 

Year on year, Spain grew 3.1 percent in the second quarter, up from 2.7 percent in the first and also meeting forecasts in a Reuters poll.

 

Spain exited an economic downturn in late 2013 following a six-year slump after a housing bubble burst, saddling banks and citizens with mountains of debt.

 

Driving growth now is a recovery in consumer spending, up 1.0 percent in the second quarter and accelerating from 0.7 percent in the first, as unemployment edges lower.

 

Both exports and imports grew strongly, increasing their rate of expansion from the first three months in quarterly terms. Exports were up 1.6 percent and imports jumped 2.3 percent.

 

In annual terms, public spending jumped 1.0 percent in the second quarter after 0.2 percent in the first.

 

"(We see) an increased possibility that in the coming quarters we will see a moderate slowdown in the rate of growth," economists at BBVA said in a recent research note.

 

The International Monetary Fund said earlier this month that Spain must do more to whittle down unemployment of above 22 percent and stimulate long-term growth.

 

Although the economy is now expanding, the reelection of the ruling People's Party (PP) is far from certain as rising inequality, joblessness and corruption have led many Spaniards to turn away from the two biggest, traditional parties.

 

The vote, likely in early December, will now be a choice between four parties as two newcomers have gained traction on promises to redress inequalities and clean up politics.

 

 

This article has been kindly provided to Sustain Europe by the Thomson Reuters Foundation.