Spanish economy likely weakened slightly in Q2, consumption to have primarily driven growth

The Spanish economy is expected to have slowed in the second quarter of 2016, but is still likely to have out-performed the euro area. The preliminary estimate showed that Spain’s GDP growth rose 0.7 percent quarter-on-quarter in the second quarter, just a tad weaker than first quarter’s 0.8 percent growth.

Consumption in the country is likely to have continued to be the primary driver of growth, whereas business investment is expected to have weakened, said Societe Generale in a research note. Moreover, net trade is likely to have remained a drag on the second quarter GDP growth. The Spanish economy is expected to further slowdown, thanks to the lack of government and the continuing political uncertainties.

Non-residential construction investment in particular is expected to continue to be impacted from the deceleration in public works. Moreover, the gradual acceleration in inflation and the slower rate of improvement of the labor market would result in slower real disposable income and thus consumption growth, according to Societe Generale.