Business sentiment continued to improve in September. The PMI recorded its tenth consecutive month of growth (56.3; +2.7 points over one month). It was driven by a dynamic services sector (57.0; +2.4 points), buoyed by continued strong tourism activity (+11.2% y/y YTD in tourist arrivals), and by a recovery in manufacturing activity (53.0; +2.5 points). Although industrial production continued to decline in August (-0.2% 3m/3m), the outlook appears more favourable, judging by the rise in business leaders' expectations for their production over the coming months (11.4; +6.2 points, according to the European Commission's economic sentiment survey).
For the first time since June 2023, harmonised inflation has fallen back below 2% year-on-year (1.7% y/y). However, it could rise slightly towards the end of the year as VAT reductions on basic foodstuffs are gradually phased out[1].
Among other good news on the economic front, consumer confidence has returned to its best level for two and a half years (-12.3 in September), driven upwards by improved expectations on the financial situation (0.5; +3.9 points; the best level for three years) and intentions to make major purchases (-19.1; +1.3 points) over the coming year. These improved expectations, combined with the slight decline in the savings rate (13.1% of disposable income in Q2) and the increase in household purchasing power, should help private consumption to pick up gradually in the second half of the year. Indeed, retail sales volumes rose in August (0.4% m/m) and new vehicle registrations rebounded strongly in September (31% m/m).
After a quarterly growth rate of 0.8% on average in the first half of the year, GDP growth is expected to moderate slightly in Q3 and Q4 (0.6% and 0.7% according to our forecasts). Over 2024 as a whole, Spanish growth should reach 2.9% and contribute 0.3 percentage points to growth in the Eurozone (0.8%), continuing to offset German underperformance, whose contribution is zero.
Article completed on 21 October 2024
