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Growth Returns To Spain

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Growth Returns To Spain

Economic data just released from Spain paints a picture of a country gradually moving in the right direction back towards growth. Gross Domestic Product (GDP) estimates for Q1 of this year show that expansion has returned to the economy. Year on year growth has just been reported at 0.6%, this is a turn around from the previous contractionary reading of -0.1%, consensus estimates were for a rise of 0.5%. Quarter on quarter growth has been reported at 0.4%, slightly higher than the prior reading of 0.3% and exactly meeting market expectations.

The Bank of Spain has recently published it’s predictions for growth in the Eurozone’s fourth largest economy. These forecasts project GDP expansion of 1.2% this year and rising up to 1.7% in 2015.

Signs of inflation returning to the Spanish economy are also in evidence this morning. The Harmonised Index of Consumer Prices (HICP) has turned positive, markets were expecting a reading of 0.3% price growth for April and this is exactly what was delivered in the year on year figure, the previous reading in March was a negative -0.1%.

It is however not an entirely positive message out of Spain this morning, the Retail Sales numbers for the month came in a little on the soft side at -0.5% year no year, this represents a further fall from March’s -0.4% and disappointed markets that had been expecting a slight 0.1% pick up.

It is a slow start to the recovery for Spain which is currently battling excessive unemployment conditions. There had also been a serious risk of a banking collapse dragging the economy down. Conditions in the financial industry have however improved to the point that the risk of an imminent banking collapse has diminished. This has prompted a ratings upgrade from Fitch which moved the sovereign debt rating up one peg from BBB to BBB+.

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