Spain's Economy Expands
November 26 2015 - 5:30AM
Dow Jones News
MADRID—Spain's economy grew in the third quarter at the fastest
annual rate since the 2008 financial crisis, official data showed
Thursday.
In its second estimate of gross domestic product for the
quarter, statistics bureau INE said the eurozone's fourth-largest
economy grew 3.4% in the July-to-September period compared with the
year earlier period, up from a rate of 3.2% in the second
quarter.
On a quarterly basis, INE said the economy slowed slightly,
expanding 0.8% from the previous quarter, compared with growth of
1% in the second quarter.
Both readings are in line with a preliminary estimate released
last month, and indicate Spain is on track to record its strongest
economic performance this year since 2007.
The statistics office provided a growth breakdown that shows
that internal demand accounted for much of the momentum in the
quarter, driven by a recovery in domestic spending. That contrasts
with a negative contribution from international trade for the third
consecutive quarter—the result of exports being outpaced by
imports.
INE said household spending, up 3.5% on the year, and
investment, up 6.5%, rose at their fastest clip since the last
quarter of 2006.
Government spending rose 3% on the year, the highest pace since
the fourth quarter of 2009, when a left-leaning government tried to
implement a Keynesian stimulus program. Prime Minister Mariano
Rajoy of the conservative Popular Party, who will stand for
re-election on Dec. 20, is now banking on an improving economy to
offset his low popularity ratings.
This spending expansion is being underpinned by rising tax
receipts, up 6.1% in the January-October period according to
estimates released Wednesday by the Budget Ministry. However,
analysts say the trend may endanger Spain's target of cutting its
budget deficit to 4.2% of GDP this year from 5.7% of GDP in
2014.
In 2014, the economy grew 1.4%. In July, the government revised
its forecast for economic growth this year to 3.3% from 2.9%
previously.
This is closely tied to rapid job creation, the result of lower
borrowing and energy costs, as well as a 2012 labor market reform
that makes it easier for companies to lower wages and fire
employees. INE said Thursday that labor costs rose a mere 0.1% on
the year in the third quarter from the same period a year ago.
Spain added over 433,000 new jobs in 2014 and the government
says it is likely to add a further 600,000 this year.
Write to David Romá n at david.roman@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 26, 2015 05:15 ET (10:15 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.