The Spanish economy, according to the INE's progress, registered a quarterly increase of 0.4% in the third quarter of 2019, the same rate as in the previous quarter. At an annual rate, the growth rate remained at 2.0%. Thus, the deceleration process is slowed down in terms of activity.

But nevertheless, employment does show a significant slowdown, and is already growing at an interannual rate of less than 2%.

In this scenario, productivity per busy returns to positive terrain, after five quarters of falls. This, together with the slight moderation of the salary per employee, which grows more than GDP and employment, has allowed a smaller increase in unit labor costs (2.1%, compared to 2.8% in the previous quarter).

In a first analysis of the results it is worth highlighting:

  • The contribution of domestic demand gains dynamism in a remarkable way and stands at 1.8 percentage points, eight tenths higher than the previous quarter, recovering the contribution it had been registering at the beginning of the year.
  • On the contrary, the foreign sector reduces its contribution to growth to 0.2 p.p., after having reached 1 p.p. in the second quarter.
  • Therefore, the composition of the growth of the second quarter was somewhat transitory and the Spanish economy once again bases its growth mainly on domestic demand. In fact, consumption and investment in capital goods regain their strength remarkably, with interannual rates of 1.5% and 5.9%, respectively.
  • Draws attention to the decline in investment in construction, with falls in their interannual and inter-quarterly rates.
  • The final consumption expenditure of the Public Administrations continues to increase, accelerating its growth rate to 2.5%, being one of the most stable components of GDP in its rate of progress.
  • From the point of view of external flows, exports maintain a remarkable growth rate, while imports accelerate, which has resulted in the contribution of the foreign sector decreasing eight tenths to 0.2 p.p.
  • On the supply side, the evolution of industrial activity stands out, which has recovered positive growth rates. However, it highlights the atony of construction activity in this period, following the strong advances of previous quarters. The service sector slows from 2.8% to 2.4%.
  • The GDP deflator increases 1.7%, which contrasts with a much more moderate CPI rate (0.1% in October).
  • While the activity maintains its growth rate at 2%, job creation is markedly moderated, with a year-on-year rate of 1.8%, compared to 2.5% in the previous quarter. This represents a net increase of 332,000 full-time equivalent jobs in the last year. By sectors, construction stands out, with a rate of 2.2%, which contrasts with those registered at the beginning of the year, exceeding 10%. The most intense job creation in the manufacturing industry stands out, reaching 2.7%.
  • One of the most positive aspects is the evolution of productivity per employee, which is positive in the third quarter, after five consecutive quarters in negative territory. If this is coupled with the slight slowdown in salary per employee up to 2.2%, unit labor costs increase at a lower rate (2.1%, compared to the previous 2.8%).

The Spanish economy has slowed its path of deceleration in terms of activity, but not employment. Even so, the Spanish economy grows above the European average and our fundamentals remain solid: reduced inflation, foreign surplus and lower private sector debt.

It should be noted that, if the foundations of our economy remain strong, it is precisely thanks to the reforms addressed in recent years. From CEOE we believe that it is necessary to initiate a new process of structural reforms that boost the competitiveness of the Spanish economy, without forgetting the need to continue the path of fiscal consolidation, as it is reflected, along with other proposals, in the document Business priorities before the General Elections of November 10, 2019.

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