Spain's economic growth gently decelerates in third quarter

Spain's economy grew by a preliminary 0.6% quarter-on-quarter in Q3, a slight moderation from Q2's 0.8% but aligning with analyst expectations. This growth, primarily driven by domestic demand, tourism, and a strong labor market, positions Spain to continue outperforming its Eurozone peers, with the government anticipating it will lead major advanced economies in 2025, despite annual growth of 2.8% falling marginally below analyst forecasts.

Analysis

Spain's economy recorded a preliminary 0.6% quarter-on-quarter GDP growth in Q3, a slight moderation from the 0.8% seen in Q2, yet aligning with analysts' expectations. This marks the ninth consecutive quarter of growth at or above 0.6%, demonstrating consistent expansion.

The growth was primarily fueled by robust domestic demand, encompassing both consumption and investment, alongside a thriving post-pandemic tourism sector. Additional tailwinds include a strong labor market supported by immigration, European Union funding, and cheaper energy, enabling Spain to consistently outperform its Eurozone peers.

Despite the Q3 annual growth rate of 2.8% falling marginally below the 3.0% anticipated by Reuters-polled analysts, the government remains optimistic. It asserts that this data reinforces upward revisions for 2025 forecasts, projecting Spain to lead major advanced economies.

Key Decisions for Investors

• Investors should monitor Spain's domestic demand indicators, particularly consumption and investment, given their role as primary growth drivers.
• Evaluate opportunities in sectors benefiting from sustained tourism growth, EU funding, and a strong labor market, which are key pillars of Spain's economic outperformance.
• Consider Spain's potential for continued outperformance relative to other Eurozone economies, as indicated by the government's optimistic 2025 forecast.