(Bloomberg) — Spain grew more than anticipated in the final quarter of last year, indicating the euro zone’s fourth-largest economy is on track to avoid a recession even as high inflation squeezes household spending.
Output rose 0.2%, according to data from the INE statistics agency published on Friday. That matches the pace in the previous quarter and exceeds the 0.1% median forecast of economists surveyed by Bloomberg. It puts 2022 growth at 5.5%, maintaining the previous year’s momentum.
Socialist Prime Minister Pedro Sanchez, who is widely expected to run for re-election this year, has pumped billions of euros into the economy in an effort to tame inflation, and shield households and businesses. The pace of price increases has eased by almost half from its July peak to 5.5% as energy costs decline.
Although growth slowed sharply in the second half of 2022, it has held up more than expected only a few months ago when most polls pointed to two consecutive quarters of contraction.
“This confirms the strength and resilience of the Spanish economy,” Sanchez wrote in a Tweet in which he defied what he called “the prophets of the apocalypse.”
Still, the higher-than-expected quarterly growth figure masks signs of weakness, according to Angel Talavera, head of European economics at Oxford Economics.
He pointed to a decline in household spending, which fell 1.8% in the fourth quarter from the previous three months, according to INE.
“The number initially is positive because it confirms that Spain will avoid a recession, but when you look at the details the data doesn’t look very good,” he said. “Most of the improvement comes from a decline in imports, which is never a good sign. I’m surprised by the decline in consumption because slowing inflation should suggest stronger spending.”
What Bloomberg Economics Says…
“The gain in headline GDP growth masks a sharp contraction in household consumption, which was down by 1.8% on the quarter. Households are struggling to keep spending, as high inflation weighs on real incomes.”
—Ana Andrade. Click here for more
Inflationary pressures in Spain, which is the largest beneficiary of funds from the EU Recovery and Resilience Facility after Italy, are expected to keep growth subdued, with the economy likely to expand only 1.1% this year, according to the International Monetary Fund’s latest estimates.
The impact of higher prices is also starting to show in the labor market. Unemployment rose slightly to 12.8% in the last quarter of the year from 12.6% in the previous three months, with the number of people employed dropping for the first time in the fourth quarter since 2017, according to INE data released on Thursday.
Spain’s GDP report comes ahead of highly anticipated growth numbers for the entire region on Tuesday. Policymakers are hoping that an unexpectedly mild winter will allow the bloc to avoid a serious slump.
—With assistance from Ainhoa Goyeneche, Joel Rinneby, Ana Andrade (Economist) and Maeva Cousin (Economist).
(Updates with Tweet from Sanchez in fifth paragraph, economist comment starting in sixth paragraph)
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
