Spanish domestic demand likely to have remained strong in first quarter

The Spanish economic growth details for the first quarter are expected to indicate that the domestic demand was robust again. Private consumption is likely to have mainly driven the economic growth, said Societe Generale in a research report. Private consumption is expected to have contributed 0.5 percentage points to the growth, followed by investment contributing 0.3 percentage points. Meanwhile, net exports are expected to have contributed neutrally.

Given the political uncertainty, which will last until the new election on 26 June, is expected to be a drag on economic growth in the quarters to come as households and firms will postpone spending and investment decisions. The latest economic indicators suggest a slowdown in momentum in the second quarter. Moreover, the environment after the elections are expected to be marked by renewed fiscal consolidation initiatives or tensions with the EU Commission, according to Societe Generale.