Spain | Are the seams starting to show?

Summary

GDP continues to rise sharply. However, the data shows a growth pattern that is unlikely to be sustainable in the long term. Even so, the differential growth that the Spanish economy is showing is something to be celebrated.

Key points

• Key points:
• Spain's GDP showed the strongest growth among the larger eurozone countries during the first quarter of the year. However, the seams that hold this trend in place may begin to experience some tension over the next few months. For example, the main engine of growth may be reaching its maximum capacity.
• Although INE's estimate is preliminary, the 19% quarterly increase in non-resident consumption during 1Q24 would situate it 42% above 4Q19 levels.
• Meanwhile, goods exports were 5.8% below their levels of a year ago and similar to 4Q19 levels. Recovery in automobile output and in automotive-dependent intermediate goods has yet to consolidate.
• Government expenditure may also have peaked, as shown by the drop in 1Q24. All of this is in an environment where no general state budget has been approved for 2024 and where there is a commitment to fiscal consolidation for 2025.
• Lastly, there is housing, which is perhaps the biggest obstacle to future growth. Right now, it is estimated that households would have to devote about 40% or more of their wage income to mortgage payments in those autonomous communities or urban centers where prices are higher.

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