The federal government is quietly admitting that meeting the target year-to-year growth rate of the Spanish economy (1.3% of GDP) will be increasingly difficult to reach, yet is still possible. The Secretary of the State of the Economy, José Manuel Campa, accepted this reality yesterday, although he stated that the government cannot be bothered with weakening macroeconomic view as depicted by the Stability Program. For the Secretary of State, alarming quarter-to-quarter growth rates for major European economies means that the greatest uncertainty pertains to development of these areas.
Immediate recovery depends in great part on the Spanish economy's capacity to recuperate ground it lost during Q2, when the rate dropped by half, or to 0.2% compared to 0.4%, from the same period last year. The economy grew 0.7% year-to-year. Following these figures that indicate a global economic slowdown is a drop in national demand by one and a half points (resulting in -1.9%), compensated by dynamic external demand that is supporting Spain?s GDP two times as much as the previous quarter for an increase of 2.6 points. Internal demand has withered, and the view remains pessimistic.
Consumer spending has dropped 0.2% year to year, reversing direction after four quarters of positive gains. Employee payrolls increased 0.5%, slightly higher than last quarter. Public Administration spending has returned to normal after making elections-related cuts; the year-to-year drop is 1%. Investment demand is low and also a cause for concern.
