Economic growth records quickest upturn since Q3 2021 in Q4

GDP reading: Economic growth gathered momentum in the fourth quarter, with GDP increasing 4.2% on an annual basis according to a preliminary estimate (Q3: +3.9% year on year), marking the best result since Q3 2021.

Drivers: Household spending growth hit an over two-year high of 4.0% in the fourth quarter, up from the third quarter's 3.5%. Spending was boosted by solid rises in both employment and wages. Government spending dropped 1.4% (Q3: +4.2% yoy). Meanwhile, fixed investment growth slowed to 4.4% in Q4, following 6.8% in the prior quarter. On the external front, exports of goods and services increased 5.1% on an annual basis in the final quarter, which was below the third quarter's 12.8% expansion. Conversely, imports of goods and services growth sped up to 10.6% in Q4 (Q3: +7.1% yoy).

Panelist insight: On the outlook, BBVA analysts said: “The available activity indicators for the beginning of 2025 have a positive balance. Taking these indicators into account, the year is starting well, and together with the trends that we have been observing in the last months of 2024, they give an upward bias to the growth forecast we have for 2025, currently at 2.7%.” Goldman Sachs’ Santiago Tellez said: “Activity during 2024 was stronger than what we anticipated at the start of the year. Nevertheless, we view this overperformance as partly driven by temporary factors, including the normalization of weather-related disruptions, and another round of pension fund withdrawals providing an extra boost to household demand in H2. We expect the activity momentum to slow to slightly below trend-growth over the next quarters as these transitory headwinds dissipate. Beyond that, a modest fiscal drag and the risk of a political crisis in 2025 will likely weigh on activity.”

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