- Household consumption accelerates on the back of job creation
- Spaniards heading to polls for June 26 after political impasse
Spanish consumer strength boosted by job creation helped maintain growth momentum in the first quarter as the nation grappled with political deadlock.
Household consumption rose 0.9 percent from the previous three months, the Madrid-based National Statistics Institute said Thursday, in a fresh sign of consumer resilience as the battered labor market heals. Job creation accelerated 0.9 percent in the quarter. From a year ago, employment has expanded at an annual pace of 3.2 percent, with more than 530,000 full-time jobs being created.
Thursday’s second reading confirmed an initial estimate showing the economy slightly beat expectations for the quarter, coming in at 0.8 percent growth in the first three months of the year. From a year ago, the Spanish economy expanded 3.4 percent.
“Jobs and household consumption are growing on par, investment in capital goods is holding strong and that generates more jobs, so it’s going full circle,” said Estefania Ponte, research director at BNP Paribas Personal Investors in Madrid, who predicts growth of 2.8 percent in 2016. “So far, indicators aren’t pointing to a slowdown as a result of political uncertainty.”
Acting Economy Minister Luis de Guindos said the first quarter performance puts the nation on track to grow close to 3 percent in 2016. The caretaker government led by Mariano Rajoy sees growth of 2.7 percent this year and 2.4 percent in 2017, which should help reduce the unemployment rate to 17.9 percent from 21 percent at present.
De Guindos said the deficit should come in at 3.6 percent of output before falling to 2.9 percent next year -- helping Spain exit the European Union’s excessive deficit procedure. The government is committed to complying with deficit rules, de Guindos said.
After missing last year’s deficit-reduction goal by almost one percentage point, officials in Madrid secured an extra year from the European Commission to bring down the deficit below 3 percent of output, although the nation still risks sanctions. The decision over whether to fine Spain for failing to rein in spending is scheduled to take place July.
Asked about a potential sanction, De Guindos said that while the Commission has the “legal right” to fine the nation under EU budget rules, he is convinced officials in Brussels won’t go ahead with sanctions and Spain will ultimately avoid a fine.
Before that, Spaniards will vote for the second time in six months on June 26 with polls showing the incumbent People’s Party winning the vote, but short of a parliamentary majority. The latest survey published by El Pais newspaper on May 22 showed the PP extending its lead and anti-austerity party Podemos overtaking the Socialists in second place as the two groups compete for the progressive vote.