Spain - 2019-2020 Scenario: Spanish miracle caught up in the European slowdown

Spain - 2019-2020 Scenario: Spanish miracle caught up in the European slowdown
  • Overview
  • Focus 1: Pedro Sanchez' tricky bet
  • Focus 2: SMI increase, a mixed effect measure
  • Latest cyclical trends
  • Our scenario framework

En résumé

Without a government and amidst a deteriorated international environment, the Spanish economy continues to surprise. Growth prospects are likely to remain above the euro area average in 2019. Yet, signs of a downturn are showing. Pedro Sanchez's social measures have offset declining external demand, but the country is now being caught by the European economic slowdown. 

Spain - 2019-2020 Scenario: Spanish miracle caught up in the European slowdown

Spain: SMI increase, a mixed effect measure. It is currently difficult to assess the impact of the SMI revaluation. While wage increases have spilled over into disposable income, there has been no tangible effect on consumption. Second quarter survey' data show, however, a slight improvement in household confidence compared to the first three months of the year. Meanwhile, rising production costs do not seem to have passed on to prices. Inflation remained contained in the first quarter (0.6%), thereby curtailing a loss of competitiveness. The pace of job creation has slowed even though the unemployment rate has been declining steadily.

Sofia TOZY, Economiste