Economic indicators quarterly changes 
GDP growth
Trends in the PMI indices are making a short-term economic downturn less likely. Our initial forecasts of a contraction in economic activity for Q1 2023 were also revised upwards, with moderate growth now expected (+0.2% q/q). The composite PMI index was up again in March, rising by 4.1 points to 55.7, its highest level since May 2022. The new orders sub-indicator (+4.2 points, to 55.2) and, to a lesser degree, the employment sub-indicator (+2 points, to 52.2) helped to drive this improvement, with price indices (input and output prices) remaining high. Consumer confidence is rising, but is still very weak.
While headline inflation has eased in recent months, thanks to falling energy prices, a second more widespread and sustained wave is now ongoing. Excluding energy, the CPI increased even more sharply in February to 8.2% year-on-year (y/y), driven mainly by rising food prices (+16.6% year-on-year). The removal of VAT on essential products, which was introduced in January, has not stopped prices from going up in the food sector for the time being.
However, the number of jobs created has continued on its upward trajectory from 2022, with a cumulative net increase of 0.7% over the first two months of 2023, according to figures from the Spanish National Employment Office (Servicio Público de Empleo Estatal - SEPE). In annual average terms, employment growth stood at 4.7% in 2022, according to the SEPE. The unemployment rate (people aged 16-64 years old) rose to 13.0% during Q4 2022, but is expected to drop again during the first six months of 2023 if job creation continues at this current rate.
Our growth forecasts for 2023 have been revised upwards, from 0% to 1.4%. This is partly due to a more positive carry-over of 0.8% at the end of 2022.
Guillaume Derrien (article completed on 20 March 2023)
