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GDP grows by 0.8% and Guindos ensures that the Catalan crisis will not impact

After knowing the growth data between July and September, the Minister of Economy hopes that the uncertainty will only affect Catalonia and the fourth quarter

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GDP grows by 0.8% and Guindos ensures that the Catalan crisis will not impact

The economy continued to show up to September a greater vigour than any analyst could expect just a few quarters ago. According to preliminary advance that has been published on Monday INE, between July and September gross domestic product advanced 0.8%, slightly below 0.9% recorded in previous quarter.

In annual terms, GDP grew by 3.1%, a rate exactly same as 3.1% annual scored between April and June and in line with forecast of government and Bank of Spain by end of year. The Minister of Economy, Luis de Guindos, has highlighted that "uncertainty will only affect fourth quarter to Catalonia" and has been confident that this impact "reverts" soon. What's more, he has assured that Catalan economy will probably return to growth rates it had before conflict, higher than rest of Spanish economy.

The strength of job creation, prolongation of an ultraexpansive monetary policy, good behavior of tourism, increase in exports, containment of oil prices and recovery of business investment give impetus to The activity. "Although somewhat less vigorous than in previous quarter, domestic demand remains main driving force in economy, in a context in which strength of labour market is maintained," explains a Bankia Research note. He adds: "In terms of external demand, it would have slightly reduced its positive contribution to growth: strength of exports, both of goods and services (tourism), is being offset by pull of imports, especially Energy ".

With three quarters already closed, it seems very difficult that at this point GDP growth of 2017 falls from 3%. Not even if political tensions in Catalonia were to last a bit of consumption and investment in remainder of year. To do this, activity would have to grow less than 0.4% between October and December, according to calculations of tax authority. And that seems very unlikely in view of inertia that economy carries. Unless re is a disaster here at end of year, it is third consecutive year in which GDP grows by 3% or more. With INE's revised data, in 2015 economy increased by 3.4% and 2016, 3.3%, well above eurozone average. A bestial increase in productivity that has allowed this year to surpass production levels before crisis but with 1.7 million workers less.

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If activity was examined between July and September, quarter began with slightly looser data. But se have been gaining momentum. The short-term indicators of services and industry improved considerably in August with respect to July. And active population Survey, most important statistic known in quarter, collected a strong increase in occupation of 0.75%. If it is also considered that it improved work full time and worsened part-time, figures of employment seem even better. Hence GDP growth of 0.8%. They move forward at very similar rates, which means that most of growth corresponds to creation of jobs. A fact that has very positive side that it is possible to place more people in labor market, but also presents a less optimistic reverse because it means that productivity does not grow much and, refore, created employment is not of much quality.

Anor positive note of quarter is evolution of retail trade. Despite higher inflation that always harms consumption, it has gone from less to more between July and September. Although experts had been predicting a slowdown for a long time, it has endured much better than anticipated, in part because of strong job creation. Even if re-entry wages in labor market are lower, more people are put to work consuming more. A different thing would happen if confidence broke down, something that y warned on account of Catalan crisis from Bank of Spain to Fiscal authority, passing through IMF or government itself.

With data until September nothing can be appreciated by Catalan conflict. And inertia is so strong that it drags a lot. That yes, in what is going year and can be warned until September that Catalonia has lost a little bellows. It is only community with Extremadura in which retail trade regresses, albeit very lightly. and employment no longer grows above what goes on in rest of Spain as it did in previous year. Now it increases at same pace despite powerful tourism sector it has. All of se data do not incorporate uncertainty generated since October 1 illegal referendum. The Government considered that next year some 3 billion of GDP could be lost due to political tensions. And tax authority raised figure in worst cases to more than 12 billion. However, Minister Guindos now holds that impact will not be such. And he said that effect will only be noticeable in fourth quarter in Catalonia. But that in principle nothing else.

In any case and irrespective of Catalonia, Bank of Spain predicts that GDP will down in next few quarters to grow 2.5% in 2018. The reasons: The rise of price of oil, appreciation of euro and, above all, a certain depletion of consumption and investment. These two rubrics reacted with great impetus to recovery by postponing many purchasing and investment decisions during crisis.

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