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Spain’s 3Q GDP growth undershoots expectations – Metro US

Spain’s 3Q GDP growth undershoots expectations

Tourists and locals watch the sunset by La Almudena Cathedral
Tourists and locals watch the sunset by La Almudena Cathedral in Madrid

MADRID (Reuters) -Spain’s economy expanded less than expected in the third quarter, preliminary data showed on Friday, raising further concerns about the recovery path after a weak second quarter and amid the spectre of rising inflation.

Flash data from the National Statistics Institute (INE) showed gross domestic product expanded by 2% in the third quarter from the second and by 2.7% from the same period in 2020. Economists polled by Reuters expected a 2.7% quarter-on-quarter expansion and a 3.5% annual growth.

Crucially, private spending decreased 0.5% quarter on quarter as Spaniards held on to savings built up over a year of subdued consumption.

Despite strong growth from the hospitality and retail sectors over summer, key industries like real-estate and financial services slowed down.

Angel Talavera, head of European Economics at the Oxford Economics consultancy, said on Twitter that the growth was “quite disappointing” and that he expected future revisions.

At the start of the quarter Spain was still grappling with its most recent wave of COVID-19 infections, which it has since reined in through widespread vaccination.

National statistics are still distorted by the effects of a strict lockdown imposed in the second and third quarters of 2020.

In September the INE slashed its final second-quarter growth figure to 1.1%, less than half its initial estimate, prompting the central bank to say it would lower its forecasts for the full 2021 significantly.

Rising inflation, which reached a nearly 30-year high in October on soaring energy costs, has cast further doubt on the speed and scale of Spain’s recovery from a historic 10.8% slump last year.

However, the government has stuck to its bullish predictions for a return to pre-pandemic GDP levels by the end of the year and expects 6.5% annual growth in 2021, followed by an even higher 7% in 2022.

The Economy Ministry said the latest data put Spain in a good position to face up to a fourth quarter likely to be marked by rising energy prices and supply bottlenecks.

Buoyant third-quarter jobs data released on Thursday, which saw Spain surpass 20 million people employed for the first time since 2008, provided some basis for optimism.

(Reporting by Marta Serafinko, Nathan Allen and Belén Carreño, editing by Inti Landauro and Angus MacSwan)

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