In a quarter dominated by Catalan uncertainty, Spanish consumers tightened their belts and took some wind out of the economy at the end of 2017.
Household expenditure growth cooled for a second quarter in the three months through December as confidence took a knock. Still, it helped the economy expand 0.7 percent in the period, the National Statistics Office in Madrid said Thursday, confirming an initial estimate.
Consumer spending was up 0.6 percent in the period, government spending rose 0.4 percent, unchanged from the previous quarter, and export growth cooled sharply, with the weakest performance in more than a year.
The quarter was marked by a failed secession attempt in the region of Catalonia that threatened the government of Prime Minister Mariano Rajoy. His difficulties were compounded by the fact that he leads a minority government, and is trying to end a political paralysis and push through his delayed budget for 2018.
Healthy consumption is crucial for the Spain’s economy as it accounts for more than half of total output. While shoppers have been at the forefront of the recovery since 2014 helped by an improving jobs market, their support could be harder to sustain without a meaningful pickup in wages.
“Consumers will continue to be the biggest contributor to growth, but the pace has slowed,” said Angel Talavera, an economist at Oxford Economics in London. “If we see a pickup in salaries, that might open some margin for growth.”
Economic growth in the three months through September was revised down to 0.7 percent from 0.8 percent. GDP was up 3.1 percent for 2017, a fourth straight expansion and well above the 2.5 percent average rate across the 19-nation euro area.
The pace may slow this year, with economists in a Bloomberg survey forecasting 2.7 percent. The Bank of Spain and the government are slightly more pessimistic, at 2.4 percent and 2.5 percent.
“We expect growth to moderate, but we don’t anticipate a dramatic slowdown,” Talavera said. “It’s going to be gradual coinciding with the end of a strong expansion cycle.”