Spain | What is happening to investment?

Summary

The country's fixed capital accumulation is 5% below pre-pandemic levels, but the aggregate masks higher lags in some components.

Key points

• Key points:
• The reasons behind this poor performance appear to be rooted in supply-side constraints and in the way NextGenerationEU (NGEU) funds are regulated and implemented.
• According to the INE, purchase of transport equipment is 22% lower than what was observed at the end of 2019, investment in housing is now 15% lower and investment in non-residential construction is 3% below pre-COVID levels.
• Supply-side constraints are responsible for companies' failure to renew their aging vehicle fleets. Here, it is surprising that the normalization of global production chains has not yet been sufficient to restore the supply of transport equipment.
• In housing, the drop can be explained by the lack of developable land, rising costs and regulatory uncertainty. While purchases have recovered significantly and prices with them, new building permits have not.
• Lastly, the NGEU funds are not having the expected pull effect on private investment.

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