On Tuesday, Spain exhibited a robust economic performance in the first quarter (Q1) of the year, with a growth of 0.6% quarter-on-quarter (q/q), according to Capital Economics.
This figure, though slightly below the consensus estimate of 0.7% and Capital Economics’ own forecast of 0.8%, reflects a still-strong economy.
Despite weaker consumption and government spending in Q1, high household income growth and government spending commitments are expected to bolster these areas in upcoming quarters.
Investment growth in Spain was notable, rising by 1.1% q/q, while services exports, particularly non-tourism services, surged by 3.5%.
The labor market also showed vigor with employment increasing by 0.9% q/q. Labor compensation per employee, although slowing from a 4.8% year-on-year (y/y) growth in the previous quarter to 4.1%, remained robust.
Capital Economics anticipates that Spain’s swift economic expansion, along with an even stronger performance expected from Ireland, will have contributed to an increase in the overall euro-zone GDP growth, which they predict to be at 0.3% q/q for Q1.
The data for this is set to be released tomorrow at 10am. However, growth in key economies such as Germany, France, and Italy is expected to be modest, and the euro-zone economy is projected to stabilize in the second and third quarters as the effects of tariff front running wane and investment diminishes.
Conversely, Sweden’s economy did not experience growth in Q1, a stark contrast to its robust performance in the previous year.
With consumer confidence in April hitting its lowest point since late 2023, there is an indication of a potential sharp decline in household consumption.
As a result, Capital Economics plans to revise its initial annual GDP growth forecast of 2.4% for Sweden.
Inflation data from Spain also came in today, with the headline Harmonised Index of Consumer Prices (HICP) remaining steady at 2.2% in April.
The national core Consumer Price Index (CPI), which excludes unprocessed food and energy, climbed from 2.0% to 2.4%.
This increase was attributed to a notable uptick in leisure and culture inflation, likely influenced by Easter timing effects, which are expected to be mirrored in the forthcoming euro-zone figures due on Friday.
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