Spain’s Economy Outpaces Eurozone Peers, Driven by Strong Domestic Demand and Industrial Growth

Spain’s economy has demonstrated remarkable resilience in the face of economic headwinds, outperforming its Eurozone peers in the first half of 2024. Revised data from the National Statistics Institute (INE) reveals that the Spanish economy expanded by 0.9% in the first quarter and 0.8% in the second quarter, exceeding initial estimates and highlighting the strength of domestic demand.

The upward revision has lifted the annual growth rate to 3.1%, exceeding analysts’ expectations of 2.9% growth. This contrasts sharply with the sluggish growth experienced in the broader Eurozone, which expanded by a mere 0.3% in the second quarter and faces a subdued outlook for the remainder of the year.

One key factor contributing to Spain’s strong performance is the robust growth in private consumption, which rose by 1% in the second quarter. This indicates that Spanish households have largely weathered the impact of interest rate hikes and continue to drive economic activity.

The services sector, particularly the tourism industry, remains a key driver of growth, with hotels and restaurants experiencing a significant 2.6% expansion in the second quarter. However, the industrial sector also performed well, driven by a 1.5% quarter-on-quarter increase in manufacturing output. This rebound in industrial activity can be attributed, in part, to falling energy prices and enhanced competitiveness relative to other EU countries.

Key Takeaways:

• Spain’s economy expanded by 3.1% in the first half of 2024, exceeding expectations and outpacing Eurozone peers.
• Robust growth in household consumption and a rebound in industrial activity, particularly manufacturing, are driving the positive performance.
• The services sector, including tourism, remains a key driver of Spain’s economic growth.
• Spain’s economy has demonstrated resilience to interest rate hikes, exceeding growth expectations for the year.

Spain’s strong economic performance in the first half of 2024 underscores its ability to navigate a challenging global economic environment. While uncertainties remain, including the potential for further interest rate increases and geopolitical tensions, Spain’s solid domestic demand and resurgent industrial sector provide a foundation for continued growth in the coming months.