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HomeLatest NewsPrivate consumption recovers strength and will support GDP in the first quarter

Private consumption recovers strength and will support GDP in the first quarter

Date: March 24, 2023 Time: 09:25:28

The Bank of Spain (BdE) advanced only a few days ago its intention to revise the growth forecast for this year upwards. The entity pointed out that the GDP could increase three tenths more than initially estimated, to 1.6%, due to the fact that last year’s evolution was finally better than expected and due to the effect of the reduction in VAT on food that came into force at the beginning of January -assuming that it will carry over completely to its final price-. The General Director of Economy and Statistics of the Entity, Ángel Gavilán, explained that this review was also influenced, among other variables, by the “greater strength of private consumption.” The macroeconomic indicators published to date point, in fact, to a good progress in household and business spending, whose contribution is essential to the economy, in the first quarter.

In general, household consumption in terms of GDP tends to be fairly constant. According to the advance of the Quarterly National Accounts that the National Institute of Statistics (INE) published at the end of February, this would have fallen by 1.8% between last October and December, when it grew to 1.8% in the previous quarter. Economists consulted considering that the figure will most likely fall upwards because one of that magnitude has not occurred since the most critical phase of the pandemic – at that time the collapse was much higher for obvious reasons, since the economy practically came to a standstill.

Sources from the Ministry of Economic Affairs confirm to ‘La Información’ that the daily indicators they manage point to a fairly strong recovery of this component of GDP to date. The figures available to the financial sector are in the same line. Total consumption in Spain increased by 13.7% year-on-year in January, according to the credit card data that CaixaBank publishes among its real-time indicators. This includes face-to-face consumption with a card, cash withdrawals and electronic commerce with credit and debit cards from the leading Spanish entity by volume of assets, as well as spending by foreigners at its POS terminals.

Improve consumer confidence and business sales

This increase in spending coincided with the third consecutive month in which consumer confidence improved in Spain. In January it rose 4.9 points in relation to the previous month to 73, its highest level since May 2022, when this indicator touched 76 points. The monthly survey published by the Center for Sociological Research (CIS) reveals that both the perception of their current situation and their expectations have improved for consumers. These more rosy prospects would also be behind the increase in daily turnover registered by large companies (those with a volume of operations of more than 6 million euros, VAT groups and SMEs and self-employed workers that are registered with the Registry of Monthly Return of VAT or REDEME).

The figures that the Tax Agency (AEAT) gathers through the Immediate Information Supply System (SII), confirm that its sales in national territory reached 3,162 million euros per day in January. It is 2.5% more than in the same month of the previous year, although 21% less than in December. However, the end of the year is always much better in terms of billing for these companies and, in fact, the drop in sales between December and January is now not as pronounced as the one that occurred in the same period just one year ago. .

The labor market resists rates, inflation and the slowdown

The national economy has avoided the scenario of slight contraction with which some organizations came to announce at the beginning of last year, among other things, due to the resilience of the labor market. This also holds up so far this year, according to figures published by the Ministries of Labor and Social Security. In January, a month in which unemployment rose sharply due to the end of the Christmas season and sales, unemployment fell by 70,744 people, below its historical average for that month (around 81,000) and allowing the start of the year also below the barrier of 3 million unemployed for the first time since 2008.

In terms of employment, the number of contributors has remained at 20 million and, discounting seasonality and the calendar effect, the average affiliation grew in January by slightly more than 45,000 contributors. In addition, between the middle of that month and the middle of February, Social Security has gained an average of 67,012 contributors in seasonally adjusted terms. This, despite the rise in interest rates (they stand at 3% awaiting a new rise at the March meeting of the European Central Bank), the annual inflation rate still holding at 5, 8% and the slowdown in activity, which comes from growing at barely 0.2% for two consecutive quarters.

In the international environment and despite the high level of uncertainty, the European Commission has ruled out that the Eurozone, where our main trading partners are located, will finally enter a recession. Brussels places Spain as the economy that will grow the most this year among the largest in the region. The European Commission published some economic forecasts this month that improve its calculation for Spanish GDP this year by four tenths to 1.4% and that also reduce the expected media inflation rate for the year to 4.4%, four tenths lower than the one you calculated just a few months ago.

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.
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