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Spain: Growth expected to be stronger than anticipated in 2025

10/06/2025
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Business climate: Economic sentiment survey

Business confidence strengthened in September (ESI at 104.7; +3 points m/m) and remains well above its long-term average. In industry, the index remains in contraction territory but is improving (-4.7; +1.1 pts m/m). Production expectations for the coming months have risen significantly since spring (3.2 vs. -0.4 on average in Q2), although they are down compared with last month (-1.1 pts).

Households: Retail trade (% change m/m, volume)

Household consumption and confidence continue to improve. Retail sales volume grew by 1.5% q/q in August. Household confidence improved significantly (50.9 in August according to the Ipsos index, up 3.1 points m/m) and returned to its highest level ever. Given these positive trends, private consumption is likely to remain the main driver of Spanish growth in Q3.

Labour market: Unemployment rate

The labour market remains robust. Employment rose in August (21.7 million people registered with social security; +2.2% y/y) and the business climate index in industry regarding hiring expectations improved (1.1: +4.2 points). The unemployment rate is approaching the 10% mark (10.3% in July), while tensions persist: the ratio of job vacancies to unemployed people remains particularly high. Negotiated wage increases continued (+3.5% y/y in July and August, compared with +3.4% in June).

Inflation (% change y/y)

Inflation continues to rebound, before slowing down? Harmonised inflation returned to its highest level since June 2024 (+3.0% y/y in September; +0.3pp m/m), while the core measure remained stable (+2.4%). However, inflation is expected to slow: producer prices fell sharply in August (-4.5% y/y; the lowest since October 2024) due to the drop in energy prices.

Spain's GDP growth q/q: actual, carry-over and forecasts

Spanish growth will remain strong in the second half of the year. After an upward revision in Q2 (+0.8% q/q), due to a better contribution from public consumption and exports, we forecast a growth of +0.6% q/q per quarter in H2. This would continue to be driven by private consumption and investment.

Completed on October 2, 2025.

THE ECONOMISTS WHO PARTICIPATED IN THIS ARTICLE
Lucie BARETTE
Team : Advanced Economies

lucie.barette@bnpparibas.com
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