The two economic data that came out yesterday show a first quarter of the year in which the economy accelerates, with an increase of 0.5% and a rise in inflation in April to 4.1 %, which was predictable after last month's sharp drop. It is a volatility of the CPI that will be maintained in the coming months.
In terms of growth, exports and investment have driven a slightly higher than expected figure, which leaves GDP just two-tenths of a way from recovering pre-pandemic levels, something that may happen next quarter.
From January to March, exports have driven growth, with an increase of 5.8% compared to the previous quarter, mainly driven by a very strong recovery in tourism. Investment has also helped, although to a lesser extent, which has increased by 1.9%, according to advanced data from the INE.
Instead, the brake came from household consumption, which fell by 1.3%, punished by inflation and the rise in interest rates. In this area, the trend of stale consumption continues and assumes that two consecutive quarters of falling private consumption are recorded.
It is a fall that, due to its forcefulness, leaves many economists perplexed. "The sharp drop in private consumption, which links two consecutive quarters, is surprising, and, moreover, it does not agree with other indicators, such as retail sales, which have gone well", says María Jesús Fernández, from Funcas, who stands out as Tourism is a major driver of growth.
"I am once again surprised by the weakness of household consumption, which is increasingly difficult to explain due to the dynamics of inflation and which does not agree with the strength we see in the labor market data", he insists in the same line Ángel Talavera, head of European economics at Oxford Economics. In addition, he points out that this 0.5% in the first quarter "brings us closer to growing by 2% this year if we manage to maintain the inertia of growth".
The INE has reviewed last year's growth data, modifying all quarters, but leaving intact the annual growth of 5.5%. Specifically, it has corrected four tenths down in the first quarter (it now stands at -0.4%), while it revises up three tenths in the second quarter (which stands at 2.5%), and also up two tenths in the third and fourth (which remain at 0.4%). In other words, a less flat end of 2022 than had been indicated, which makes it easier to boost activity at the beginning of 2023.
The First Vice-President and Minister of the Economy, Nadia Calviño, emphasized that "economic growth and job creation have accelerated in the first quarter of the year and we have practically recovered the pre-pandemic GDP level, and employment is clearly at the top." From his ministry, they added that the GDP is one of the last indicators that must recover to the pre-pandemic level, something that has already been achieved with employment, youth unemployment and investment data.
As for inflation, it is rising again after the respite in March. The CPI rate goes back to 4.1% year-on-year in April, eight tenths more. It is true that if the March data benefited from the statistical effect when compared to the month in which the Ukrainian war began, with the energy shot up, now the opposite is happening. In April 2022, inflation moderated. There are ups and downs that will continue over the coming months. It is also the argument put forward by Economia, that "general inflation has picked up due to the base effect because it has been compared with the month - April 2022 - in which the fuel bonus was introduced".
On the other hand, core inflation, which excludes energy and fresh produce, has fallen by almost a point due to the slowdown in food price growth, from 7.5% in March to 6. 6% in April. "It seems that we have hit a ceiling in the underlying. In the coming months there will be volatility due to the base effect and because we will have to see what happens to salary negotiations, if salaries start to rise, which would have an effect in the second part of the year", analyzes José Emilio Boscá, economist of Fedea and professor at the University of Valencia.
