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 equal to one annotated between April and June and in line with forecast of government and Bank of Spain by end of year. After knowing fact, 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.Learn More
- Government cuts three tenths of GDP growth for 2018 by Catalonia
- If GDP has recovered, why can't it be noticed so much?
- The Bank of Spain warns of economic risk for " political tensions in Catalonia"
- The tax authorities alert that y will be lost up to 12 billion if Catalan crisis is Enquista
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 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 very positive fact because you get to put more people in labor market. However, it 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 trust breaks down, something that has brought to mind Catalan crisis Bank of Spain, Fiscal authority, 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. To solve Catalan problem well, economy can grow even above 2.5% in 2018, said Guindos.
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. Many purchasing and investment decisions were postponed during crisis. And this provoked that with recovery se two headings reacted with great impetus. But in next few quarters y might lose strength.The government responds to Brussels
The Ministry of Economy has answered in a letter to European Commission that as soon as possible it will take necessary measures to achieve fulfilment of deficit target, set at 2.2% of GDP for 2018.
The Government had sent a budget plan to Brussels in which it did not pick up any policy changes because it did not have sufficient support to close a budget. In face of this document, community executive was annoyed and sent a letter to Spanish Government to ensure that it prepared budgets to ensure compliance with required deficit targets.
So now Ministry of Economy is moving commission to give it a new budget plan when 2018 budgets are presented in Congress. These accounts will include a 2.2% deficit target for 2018, explains letter. "According to latest data on budgetary execution, Spain is expected to meet fiscal objective of 3.1% for 2017, with a very low risk [that this is not case]. This puts Spain in a very good tax-exit position for 2018, "he underlines text.