Spanish Economy Shows Impetus as Rajoy Seeks Government Deal

  • Jobs data, services show strength beating expectations in June
  • Guindos says nation likely to grow above 2.7% forecast in 2016

The Spanish economy showed fresh signs of momentum as Mariano Rajoy kicks off negotiations to form a government after an unprecedented political deadlock.

New data on Tuesday showed a gauge for services jumped to 56 in June, beating a Bloomberg News survey that predicted an increase to 55. A composite indicator of activity rose to 55.7, the biggest leap in six months, defying the economist forecast of a slowdown. Employment data also added to the positive picture after jobless claims for the month fell to the lowest level since 2009.

The latest health check on the Spanish economy comes as caretaker Prime Minister Rajoy seeks to secure a deal after winning last month’s repeat election. Still short of a majority, Rajoy has called on his traditional rivals, the Socialists, to join his PP party in a government of national consensus. He has yet to meet Socialist leader Pedro Sanchez, who has hasn’t spoken publicly since June 26 when the vote took place.

Acting Economy Minister Luis de Guindos highlighted that the Spanish economy continues to push ahead while saying that approving next year’s budget, for which the PP will need the backing of a significant portion of parliament, is the next big challenge. Asked about the pace of the recovery, Guindos hinted at an upward revision of growth.

“The economy continues to grow above 3 percent,” he told Onda Cero radio in an interview on Tuesday. “The government’s projection is 2.7 percent; it’s a more than prudent estimate that we will revise upwards.”

The Spanish economy grew 3.2 percent last year, the fastest pace in eight years, driven by household spending that benefited from rising consumer confidence and job creation. De Guindos told Onda Cero it was possible that 2016 economic growth could exceed last year’s.

Spain’s National Statistics Office is due to publish a flash estimate for gross domestic product in the second quarter on July 29. Quarterly unemployment data is due July 28.

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