Consumer spending fueling Spain’s economic upsurge
National Statistics Office confirms GDP grew 1.4% last year with 0.7% rise in fourth quarter
Spain posted some of the strongest economic growth figures in the entire euro zone in the last quarter of 2014, growing 0.7% from the previous three months.
This rate was only matched by Germany among Europe’s major economies.
The growth was almost entirely due to increased household consumption, according to new data released on Thursday by the National Statistics Institute (INE).
The figures show that GDP advanced an average 1.4% in 2014, allowing Spain to leave behind six years of near-continuous recession.
The surge caught analysts by surprise after, on average, they had forecast annual growth of 0.7%. The International Monetary Fund (IMF) delivered the most inaccurate estimate of all, announcing that the Spanish economy would not grow at all in 2014.
The recovery really gained traction in the last quarter of the year, which reflected greater growth than any other three-month period since late 2007.
Meanwhile, families spent 0.9% more, keeping up the upward trend that began several months earlier.
With exports performing worse than other years and construction only now beginning to recover from the real estate debacle, consumer spending has become the main force driving the economic upsurge.
Several indicators had been pointing at this for some time: retail sales experienced positive growth again last year for the first time since the beginning of the crisis, and December sales advanced 6.5% compared with the same month the year before, the greatest increase in a decade.
Now, experts are warning that this increased spending does not reflect a clear recovery in household income: the first rise in income in seven years has done little to compensate for general wage devaluation and the fall in public subsidies.
But incipient job creation has been positively affecting consumer confidence, as has the lower consumer price index, which has brought down the cost of basic goods. This is particularly true for gasoline prices. Bank loans to consumers have also been reactivated after a long dry spell.
Now, analysts say that consumption will continue to grow in 2015, partly thanks to an income tax cut that will be applied to 2014 revenues. Prime Minister Mariano Rajoy, who faces a tough re-election campaign this year, is forecasting growth of nearly 2.5% for this year.