The Spanish economy begin to feel the impact of inflation escalation. The gross domestic product (GDP) in the first quarter slowed down to 0.3% compared to the fourth quarter of 2021. This evolution, lower than the Bank of Spain estimates, placed the growth rate at 6.4%according to data from the National Institute of Statistics (INE).

One of the factors that has contributed most to the reduction in the level of activity has been the collapse of household consumption, which between January and March experienced a decrease of 3.7%, compared to the increase of 1.5% between October and December. The increase in the general level of prices has eroded the purchasing power of families, which has curbed consumption.

The GDP registered a quarter-on-quarter variation of 2.2% in the fourth quarter of last year, with a year-on-year rate of increase of 5.5%. All this after the debacle experienced in 2020, the year in which the pandemic broke out, with a quarter-on-quarter drop of 17.7% in the April-June period, after which there was a rebound.

INE data confirm that the cruising speed of the Spanish economy has been slowing down, especially after the war in Ukraine. In updating its forecasts, the Bank of Spain estimated that the GDP would grow between January and March of this year by 0.9% and that the impact of the Ukraine war and the consequent escalation of inflation, located at 8.4% in April, will be especially noticeable in the second quarter, with an increase of 0.1%. The advance data from the INE worsen even those estimates of the issuing institute.

In addition to the fall in household consumption, the data reflects a certain slowdown in investment, which remains in positive territory, with a rise of 2.4% between January and March, which is well below the 3.6% of the last quarter of last year.

The Government this Friday it revises its forecasts, located until now at 7%, but very far from those of all public and private organizations. The Bank of Spain itself reduced growth for this year by almost one point in its latest review, to 4.5% (5.4% in December). And the same happens with the Independent Authority for Fiscal Responsibility (Airef), which has lowered it from 6.3% to 4.3% and the International Monetary Fund (IMF), which has placed it at 4.8%.

According to the INE, employment in the economy, in terms of hours worked, registered a quarter-on-quarter variation of 3.2%. This rate is smaller in the case of full-time equivalent jobs (0.5%, which is two tenths less than in the fourth quarter) due to the increase observed in the average full-time working hours (2.6%).

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In year-on-year terms, hours worked grew by 7.5%, a rate 4.8 points higher than that of the fourth quarter of 2021, and full-time equivalent positions grew by 5.3%, five tenths less than in the fourth quarter, which represents an increase of 934,000 full-time equivalent jobs in one year.

Forecast cuts affect all the world’s economies. This same week, the German Government has placed the forecast growth for this year at 2.2%, this is 1.6 points less than the previous projection.


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