Gross domestic product grew by 0.3% quarter-on quarter in the third quarter according to the advanced data of Spain’s National Statistics Institute. This is 0.1 percentage point less than in the second quarter, confirming the slowdown of the economy.
Private consumption was the main growth driver after increasing by 1.4% quarter-on-quarter, thanks to the moderation of inflation and the resilience of the labour market.
Inflation averaged 2.8% in the third quarter, the lowest figure since the third quarter of 2021, while employment increased by 0.75% quarter-on-quarter, seasonally adjusted.
As a whole, domestic demand contributed 0.7 percentage points to quarter-on-quarter GDP growth while external demand subtracted 0.4 percentage points due to exports, which fell by 4% quarter-on-quarter.
On annual terms, Spain’s economy expanded by 1.8% in the third quarter, outpacing the eurozone average by 1.7 percentage points.
The economic slowdown in the eurozone is set to further affect Spanish economy. Monthly indicators point to weak economic momentum towards the end of the year.
The Eurozone Composite Purchasing Managers Index registered the steepest decline since November 2020, after falling in October down to 46.5. This is the fifth month in a row that the Index posts beneath the 50 threshold, which indicates contraction.
The PMI Index, which is compiled by S&P Global from the survey responses from manufacturers and services providers, points to a decline in business activity, dragged down by the weakness of Germany.
While the growth outlook remains gloomy, headline inflation in the EU area eased to 2.9% in October, the lowest rate in more than two years.
In this context, the European Central Bank left interests rates unchanged (at 4.5% for the refinancing rate) at its last meeting in October for the first time since July 2022. The central bank is set to keep a tight policy and maintain rates to achieve its inflation target. Rate cuts are not expected in the short term.
Spanish economic growth is likely to gradually ease due to the impact of high interest rates and the weak external demand environment. New geopolitical uncertainties could add new headwind, though domestic political uncertainty is likely to dissipate as negotiations to form a government following the 23 June elections are underway and close to reaching an agreement with Catalan pro-independence parties. The Socialist leader Pedro Sánchez has until 27 November to submit his candidacy. In the event that his PSOE party's candidacy fails, new elections would be held on 14 January.