Spanish Economy

In the beginning of 2011, the Spanish economy continued growing at a weak rate against the background of the progressive recovery in the world economy, but it still had room for uncertainty. GDP posted a quarter-on-quarter increase of 0.2% in 2011 Q1, unchanged on the previous quarter. In terms of the year-on-year rate, output continued on the path of slow recovery seen in previous quarters, its pace accelerating by 0.1 pp to 0.7%. This was the outcome of a negative contribution by national demand, on a similar scale to that of the previous quarter, and of the increase in the positive contribution of net external demand, which resumed the role of the main source of expansion of expenditure, with a contribution of 1.4 pp. Under national demand, the moderate pick-up in household consumption and the increase in investment in equipment partly countered the fall-off in the public components of spending, affected by the ongoing austerity measures and the decline in residential investment. In tune with this outlook, all the non-agricultural productive branches except construction posted moderately positive growth rates, and there was a particularly salient rise in industrial activity. Notwithstanding, employment fell further, by an estimated year-on-year rate of around 1.3%, which was slightly more moderate than in the previous quarter (and in line with the EPA employment figures for that period). The unemployment rate rose by 1 pp to 21.3% in Q1, against the backdrop of a slight easing in the rate of expansion of the labour force.

Despite the cyclical sluggishness the Spanish economy continues to evidence, inflation remained on a rising course. Driving it, as had been the case in the closing months of 2010, are factors that are, in principle, temporary, including most notably dearer energy. The year on-year rate of change in the CPI rose to 3.6% in March (3% in December last year), while the attendant rate of the CPI excluding unprocessed food and energy was lower, at...