Our forecasts are for Spanish GDP to grow by 0.3% in the first and second quarters of 2023. In fact, PMI surveys have posted a clear rebound since the beginning of the year. In particular, the composite index reached its best level in almost a year and a half (58.2), led by services (59.4). However, the deterioration in purchasing power is still severely affecting households' confidence and their ability to save. In March, it reached its worst level since December 2013, according to European Commission figures.
Spain: Economic indicators quarterly changes
Private consumption in Spain, which fell 2.4% q/q in Q4 2022, could, however, be somewhat better orientated in Q1 2023. In real terms, retail sales (excluding service station) fell by 2.6% m/m in February, but the three-month moving average is still up. Furthermore, new vehicle registrations rebounded in the first quarter (+44% q/q compared to Q4 2022 in seasonally adjusted terms) after a difficult 2022.
While inflation is weighing on consumer spending, it is supported by job creation, which continued to rise in the first quarter of 2023, following solid gains in 2022. According to the Spanish Employment Agency (SEPE), the number of people in employment affiliated to the social security system increased by 76,000 in March and by 174,000 (+0.9% q/q) over the first quarter as a whole, compared to the previous quarter. Unemployment fell by 60,000 people (-2.1% q/q), hitting its lowest level since September 2008.
GDP Growth
In terms of inflation, developments are favourable as it fell sharply in March (3.1% y/y compared to 6.0% in February, harmonised index), with deflation in energy prices having intensified (-25.6% in March). However, core inflation (excluding energy and perishable foods) is far from registering the same momentum. Price increases slowed slightly from 7.6% y/y in February to 7.5% in March but remain excessively high.
Guillaume Derrien (article completed on 18/04/2023)
