GDP growth steady in Q3

GDP reading surprised markets on the upside: In Q3, economic growth was unchanged at Q2’s 0.8% on a seasonally adjusted quarter-on-quarter basis. The reading surprised markets on the upside, as they had been expecting a mild deceleration. On an annual basis, economic growth gathered traction, accelerating to 3.4% in Q3, from the previous period's 3.2% expansion and marking the best result since Q1 2023.

Domestic demand underpins growth: Household spending increased 1.1% in the third quarter, supported by cooling price pressures and a historically low unemployment rate (Q2: +1.0% s.a. qoq). Moreover, public consumption sped up to a 2.2% expansion in Q3, buoyed by EU funds (Q2: +0.6% s.a. qoq). That said, fixed investment contracted 0.9% in Q3, marking the worst reading since Q4 2022 (Q2: +0.4% s.a. qoq). All in all, domestic demand contributed 0.9 percentage points to growth, up from 0.7 percentage points in Q2. On the external front, exports of goods and services increased 0.9% on a seasonally adjusted quarterly basis in the third quarter, which was above the second quarter's 0.7% expansion. In addition, imports of goods and services growth picked up to 1.2% in Q3 (Q2: +0.6% s.a. qoq), marking the best reading since Q1 2023. Consequently, external demand subtracted 0.1 percentage points from growth, swinging from a contribution of 0.1 percentage points in Q2.

Growth to soften ahead: Our panelists expect momentum to soften in the coming quarters. Looking at 2025 as a whole, GDP growth should soften relative to 2024 as exports plus both private and public consumption decelerate. Nonetheless, Spain will remain the top performer among the Euro area’s large economies.

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