Economic growth data released this Friday The National Institute of Statistics (INE) shows the extent to which inflation has stifled production activity in Spain and slowed job creation. According to National Accounts data developed by INE Spain’s economy grew by 0.2 percent in the third quarter of the year Compared with the latter (compared to the previous quarterly rate of 1.5%), GDP thus grew by 3.8% compared to the same period of the previous year, which is well below the previous figure of 6.8%. All this in a context where average inflation in the first nine months of the year was close to 9%. The ‘good news’ is that Inflation slowed again in October third consecutive month (7.3% increase). The ‘bad news’ is that the European Central Bank has raised interest rates to 2% again this week and said it will continue to do so until it pushes inflation in the eurozone to 2%. These are some of the keys to the latest National Account statistics that explain why growth has slowed.
Have families stopped spending?
Definitely. Data from National Accounts for the third quarter show that Households spent at least 10.1% more in the third quarter compared to the same period of the previous year. Under normal circumstances, such growth in private consumption would be sufficient to trigger economic growth. But the reality is that, according to the data published by INE, if the effect of inflation is discounted, real growth of private consumption was only 1.5%. The difference between one rate (10.1%) and another (1.5%) is due to the increase in prices. In short, households spent 10.1% but only consumed 1.5% more, so their spending barely boosted economic growth.
Have companies stopped investing?
Anyone. Something similar happens here, as in private consumption. The amount allocated by companies to investments increased by 9.4% in the third quarter compared to the same period of the previous year. But if the impact of the rise in prices is discounted, investments increased by only 2.9% on a clearly slowing profile.
Is it exported less now?
Again, the answer to this question lies in inflation. this Spanish companies exported at least 35% more in the third quarter compared to the same period of the previous year. However, in real terms, if we do not take into account the effect of inflation, exports increased much less: 18%. It continues to be a very significant growth rate, keeping foreign sales of Spanish companies at record levels. However, the worsening international situation, with 18% lower than the previous quarter (23.1%) and recession forecasts in Spain’s two main markets (Germany and Italy), does not call for optimism.
What about employment, benefits and wages?
Data from the Active Population Survey (EPA) released this Thursday and the National Accounts this Friday show that the Spanish economy continues to create jobs, albeit at a slower rate. Specifically, the creation of full-time equivalent jobs increased by a significant 2.9% in the third quarter (which is an increase of 540,000 jobs a year), but in the second quarter it did so at a much higher rate, 5.2. %. If the number of hours worked is measured, the slowdown is nuanced: they grew by 3.3% in the third quarter, at a similar rate to the second quarter. There is more data to be drawn from the National Accounts statistics: in the third quarter, companies’ profits increased by 11.1% year-on-year, while the wage bill increased by 4.8%. This increase in the wage bill is primarily a result of the fact that: there are more jobs (3% more), because the average wage per employee increased by only 1.7% Compared to the same period of the previous year. As a whole, unit labor cost (taking into account other factors such as social contributions) rose 0.8% in the third quarter, well below the overall increase in production prices (third quarter GDP deflator was 3.7%). quarter), as highlighted by INE in their press release.
Is Spain’s economy going into recession?
According to the government, weak growth of 0.2% in the third quarter is in line with a rate equal to or higher than the 4.4% projected by the Executive for the full year. However, it is also in line with the scenario predicted by the Financial Authority (Airef), which predicts that the gross domestic product (GDP) could fall in the fourth quarter of 2022 and the first quarter of 2023, thereby triggering what is known as a “technical recession” (with negative rates of change). two consecutive quarters). However, Airef’s central scenario is weak, with a 1.5% growth in the Spanish economy and 0.3% employment growth in 2023. does not allow to talk about recession, as described in the independent body itself. But this central scenario could be complicated if the euro zone’s economy worsens. European Central Bank President Christine Lagarde admitted on Thursday that there is an “increasing risk of recession” in the euro area and that unemployment will rise from a record low of 6.6% in August. In its September forecasts, the ECB predicted that the euro area would grow by 0.9% next year in the most likely forecasted scenario at that time, although it calculated a 0.9% decline in GDP in the adverse scenario. The senior French official admits that the situation is now worse, though not as bad as a -0.9% recession would have resulted.