Household consumption boosts Spanish GDP growth in Q2, consumer spending to ease in quarters ahead

Spanish economic growth data for the second quarter came in line with the initial estimates reporting a slight acceleration of 0.1 percentage point to 0.9 percent quarter-on-quarter, leaving output up 3.1 percent year-on-year.

The release today provided the first official expenditure breakdown that affirmed that the growth continued to be relatively widespread. As usual, household consumption contributed the most to the economic growth in the second quarter. Indeed, this component of spending accelerated, rising 0.7 percent sequentially in line with the average of the last three years, from growth of 0.4 percent quarter-on-quarter in the first quarter.

This was partially countered by a slowdown in government consumption by 0.6 percentage point to 0.2 percent quarter-on-quarter, while fixe investment growth decelerated to 0.8 percent sequentially from over 2 percent in the first quarter. However, there was also a positive contribution from net trade for the fifth quarter out of the last six. All indications are that strong growth has been sustained into the current quarter, although a slight moderation to 0.7 percent is expected, noted Daiwa Capital Markets Research. A further deceleration is expected in the future as consumption becomes slightly less supportive.

While rapid employment growth in recent years has aided in boosting consumer sentiment and underpin household incomes, persistently subdued wage growth has meant that growth in employee compensation has not been successful in keeping up with consumption. The household savings rate has now trended back close to its pre-crisis low. Unless it continues to fall to new lows, consumer spending is expected to become slightly more restrained in the quarters ahead, added Daiwa Capital Markets Research.

At 21:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at 40.7531, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 1.03646. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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