Powerful upward revision of growth in Spain. The Spanish GDP registers a variation of 1.5% in the second quarter of 2022 compared to the previous quarter in terms of volume (discounting inflation or the GDP deflator). This rate is 1.7 points higher than that registered in the first quarter (that the INE has revised downwards with a contraction of -0.2%) and four tenths higher than the figure advanced last July. This increased growth is due roughly, to a better performance of exports, compared to the fall in imports. On the other hand, the year-on-year change in GDP stands at 6.8%, compared to 6.7% in the previous quarter. This rate is five tenths higher than the one advanced on July 29, As reported by the National Institute of Statistics.
The contribution of national demand to the year-on-year GDP growth is 1.9 points, which is 1.9 points lower than in the first quarter. On the contrary, foreign demand has contributed 2.1 points more than in the previous GDP publication. Thus, the entire upward revision of the data is thanks to a better performance of exports.
It must be taken into account that in terms of national accounting, the expenditure of tourists in Spain counts as ‘export of tourist services’which represents an important contribution to the national economy, especially when comparing with 2021, when travel restrictions were still very strict.
External demand has presented a contribution of 4.9 points, 2.1 points higher than that of the previous quarter. The INE has revised Spain’s exports very upwards (they enter the GDP equation with a positive sign), while it has greatly reduced imports, which enter by subtracting in the equation that is formulated as follows: GDP= final consumption expenditure + gross capital formation (investment) + exports – imports. Although it seems strange, a simple drop in imports, ceteris paribus, triggers a higher GDP figure.
So with this revision comes an unexpected turn of events. The contribution of foreign demand has become the main contributor to GDP growth, contributing 4.9 points (compared to 3.6 in the first estimate), while domestic demand has only contributed 1.9 points (compared to to the 2.6 that he had contributed in the first estimation).
Although the GDP data is positive, this drop in domestic demand may be the reflection of a national consumer that has started saving as a precaution in the face of future expectations about growth and employment that are dimming at a forced pace.
This downward revision in the first quarter has been the product of the investment crash (gross capital formation), a fall that was not included in the first INE publications and that is now estimated at a 5% decrease compared to the last quarter of 2021.
Spain contracted in the first quarter
In addition, the INE has revised downwards the growth of the first quarter of 2022, when the economy contracted by -0.2%, compared to the 0.2% expansion that had been announced in the previous publication. This drop in GDP in the first quarter ‘inflates’ the rise (quarterly rate of change) in GDP in the second quarter.
In this case, the downward revision is due to the collapse of investment (gross capital formation). While in previous publications a positive investment growth was calculated, in the latest review (published this Friday) it has been concluded that investment fell by 5%. This drop in investment was 100% to blame for the downward revision of the first quarter.
Inflation and employment
On the other hand, the implicit GDP deflator increases by 3.6% (due to the rise in inflation) compared to the same quarter of 2021, three tenths more than in the last quarter.
Employment in the economy, in terms of hours worked, registered a quarter-on-quarter variation of 1.1%. This rate is smaller in the case of full-time equivalent jobs (1.0%, which is 1.1 points more than in the first quarter) due to the increase in the average full-time working hours ( 0.1%).
In year-on-year terms, hours worked grew by 3.3%, a rate 3.7 points lower than that of the first quarter of 2022, and full-time equivalent positions grew by 5.2%, one tenth less than in the first quarter, which represents an increase of 939 thousand full-time equivalent jobs in one year.