Investments and Exports Suppress Spanish Economy
May 21st, 2012
According to the Quarterly National Accounts data published on Thursday by the National Statistics Institute, the contraction of 2.6% in investments and the 0.9% drop in exports, coupled with stagnant consumption and public spending cuts, caused the economic decline between January and March, and puts Spain officially in recession after registering in the first quarter of the year, a quarterly drop in GDP of 0.3%, equal to that experienced in the latter part of 2011.
The contraction of the first quarter, driven by the stagnation of consumption and the decline in investments, has produced what is called a technical recession, for which at least two consecutive quarters of negative growth are required.
This is the second time during the crisis that Spain has entered recession. It first entered recession in the fourth quarter of 2008, after accumulating two quarters of decline, and did not leave it until the first quarter of 2010, when the quarterly GDP advanced 0.2%. Two years later, the Spanish economy is back in recession.
In annual terms, the Spanish economy contracted by 0.4% in the first quarter after seven consecutive quarters in the positive. The National Statistics Institute explained that the annual decline in GDP between January and March was due to a more negative contribution in domestic demand, which was partially offset by a positive contribution of external demand.
According to the Institute, the contribution to aggregate growth in domestic demand was three-tenths more negative in the first quarter of this year than in the fourth quarter of 2011, standing at -3.2 points, while external demand (the difference between imports and exports) reduced its contribution to quarterly GDP from 3.2 to 2.8 points.
The statistics agency said that the eurozone economies recorded zero quarterly growth during the first quarter. Germany and Austria rose 0.5% and 0.2%, respectively, the French economy stagnated and the other major European economies experienced declines in their GDP, with contained declines in the case of the Netherlands, United Kingdom and Spain, and more intense in the case of Italy (-0.8%).
The use of the economy, measured in terms equivalent to full time jobs, fell at a rate of 3.8%, a rate half a point higher than the fourth quarter, representing a net reduction of almost 655,000 jobs in one year.
Decline in Public Consumption and Investment Deepens
The year-on-year decline in the Spanish economy during the first quarter has also caused the greatest slowdown in consumer spending of public administrations and the decline, more pronounced than in the previous quarter, in investment.
In particular, Cinco Dias reported that household consumption contracted by 0.6% in the first quarter, year-on-year, compared to -1.1% in the fourth quarter of last year, while consumption of institutions stagnated, in contrast to -0.8% the previous quarter. Public consumption fell by 5.2% against the 3.6% decline experienced in the fourth quarter of last year.
Investments also accelerated their decline from 6.2% the previous quarter to 8.2% at present. The construction sector (-10.2%) and capital goods (-5.9%) are the areas most affected.
- Spanish Economy Shrinks 0.3% in Last Quarter
- Exports Aid Spain's Return to Growth
- Spanish Exports Encouraging for the Economy