Spanish Consumers Sustain Growth Momentum Amid Impasse

  • Household consumption shows resilience as export pace declines
  • Socialist leader struggling for support before confidence vote

Shopping in Madrid.

Photographer: Antonio Heredia/Bloomberg

The strength of Spanish consumers helped maintain momentum in the fourth quarter as an inconclusive election result led to political gridlock.

Household consumption showed signs of resistance expanding 0.8 percent from the previous three months, when it grew 1.1 percent, the Madrid-based National Statistics Institute said Thursday. Gross domestic product expanded 0.8 percent in the three months to December while imports grew just 0.3 percent, down from 3.1 percent in the third quarter. Exports, which initially led the recovery, lost steam, expanding 0.9 percent from 1.8 percent the previous quarter.

The pace of quarterly expansion matched the statistics office initial estimate released Jan. 29. Overall, the Spanish economy grew 3.2 percent in 2015, the fastest pace since the 2007, although marginally below the government’s target of 3.3 percent for the year. Job creation for the quarter, which typically sees firms hiring temporary workers, slipped to 0.6 percent from 0.7 percent. On an annual basis, employment rose 3 percent.

“Overall, a set of positive data and some strong figures in capex investment, this is a piece of data we’ll be watching out for going into the first quarter to see whether the political uncertainty starts to affect business decisions,” said Estefania Ponte, research director at BNP Paribas Personal Investors in Madrid.

In its monthly economic bulletin published Feb. 24, the Bank of Spain said dynamism stemming from household consumption continued this year, but noted confidence indicators had shown “mixed signals” in January as talks to form a government dragged on following December’s election.

The latest health check on the economy comes as Socialist leader Pedro Sanchez prepares to face a confidence vote in parliament to become prime minister on March 2. If he fails to win an overall majority in the ballot, a new vote will take place March 5, where a plurality will suffice. If no agreement is reached, the nation could be heading for new elections in June.

While the Iberian economy has shown resilience to the impasse, credit rating agency Moody’s Investors Service warned whoever leads the next government faces structural challenges after it changed the outlook on the nation’s debt outlook to stable form positive on Feb. 19 citing a slowdown in reforms and efforts to balance the budget.

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