The diagnosis made yesterday by the National Institute of Statistics (INE) on the Spanish economy has two sides. The friendly one is the significantly upward revision of the first part of the year, so that the experts already take it for granted that we end 2022 with growth of around 5%. That is to say, above even the always optimistic forecasts of the Ministry of Economy. On the other hand, the worrying side is the demonstration that this impulse was given in the first part of the year and that since the summer the activity has lost steam. In the third quarter, growth was practically flat, a meager tenth, and in the fourth it will not be much different. Here the INE does not get wet, but the Bank of Spain has placed it this week at 0.1% and some analysts, such as Funcas, even place it in negative.
What the INE did yesterday was a general review of the calculations it has carried out during the year. According to the Ministry of Economy, such changes are justified by the readjustment of seasonal factors, after the exceptional situation caused by the pandemic, and certainly significantly change the pattern of economic growth throughout 2022.
First of all, the positive part. In the year as a whole, the INE revised GDP for the first quarter upwards by three tenths, which went from the previous -0.2% to 0.1%; and five tenths that of the second quarter, which increased from 1.5% to 2%. "With these data, the economy will grow by at least 5% this year," says Raymond Torrres, from Funcas.
But here the momentum ends. Regarding the summer months, from July to September, the economy only grew by 0.1%, one tenth below the anticipated data.
In this way, the dark omens of an entry into recession of the Spanish economy are denied. The Bank of Spain already pointed out this week that we will avoid it, although the end of the year and the beginning of the next will be weak and that the rebound will only come in the spring.
Meanwhile, the economy shows signs of wear. The slowdown comes largely because consumption and investment are flat. Household final consumption spending remains at a paltry 0.1%. It is a drastic correction of the data advanced by the INE which, to the general surprise, had placed it at 1.1%. This is corrected and it is shown that consumption cannot hold up and that inflation with its consequent loss of purchasing power takes its toll in this field. Regarding investment, it fell by 0.1%, returning to negative rates after two consecutive quarters of growth.
“The worrying face is that the slowdown is more intense and the loss of household purchasing power is confirmed. They have exhausted the savings cushion and it shows directly in consumption”, says Raymond Torres, who anticipates that “a very weak end of the year will be confirmed, with possibly a negative fourth quarter”.
“A first half of the year with stronger growth is combined with a slowdown at the end. Activity indicators for the third and fourth quarters are weak, but less weak than we expected. For example, the labor market is slowing down, although less than expected," says Oriol Carreras, an economist at CaixaBank Research.
For its part, the Ministry of Economy highlights that there is a significant upward revision of the year-on-year rate estimated for the third quarter. The INE raises it six tenths to situate it at 4.4%. “These data point to growth that is clearly higher than expected,” said the First Vice President and Economy Minister, Nadia Calviño, who added that “the Spanish economy remains on a path of strong recovery…. and it is holding up well even in such a complex international context.”
It is an upward revision due to the better than expected performance of both consumption and exports. From the ministry, they underline what we called the friendly face of the INE data, the highest growth during the first part of the year; and they enter less to comment on the worrying, the weakness with which the economy reaches the end of the year and that portends some difficult months, but not black as some prophecies painted.
