The Spanish economy contracted again in the first quarter of the year after the Gross Domestic Product (GDP) fell by 0.5%, weighed down by the decline in consumption and investment as a result of the restrictions of the third wave.
Thus, the forecast that advanced some of the main indicators of the country’s economic health is fulfilled and that led the Government to reduce the growth forecast for this year by seven tenths, to 6.5%.
Specifically, according to the advance of National Accounting data published this Friday by the National Institute of Statistics (INE), the Spanish GDP registers a quarterly variation of -0.5% in terms of volume as a consequence of the decrease in consumption and investment .
The contribution of national demand to year-on-year GDP growth was -2.6 points this quarter, 3.6 points higher than in the fourth quarter. Specifically, consumption fell by 0.6% in the first quarter due to the return to negative rates of household consumption and non-profit institutions serving households (NPISHs), which showed decreases of 1% and 2.1% until March, compared to the 0% and 0.6% rates of the previous quarter.
Of consumer spending, only public spending remained positive during the first quarter, with growth of 0.5%, its lowest in two years after growing at a rate of 1.3% in the two previous quarters.
Investment also returned to negative values and also after two quarters of progress. Specifically, between January and March, investment contracted by 1.9% , compared to the growth of 1% in the previous quarter and the historical increase of 21.5% that it experienced in the third quarter of 2020.
Business investment in property assets equipment and machinery remained positive, with an increase of 0.9%, but the 5.2% drop in investment in housing and construction stands out .
In the same line are the results of exports and imports, which presented negative rates of 0.1% and 1.3% until March after having registered advances of 4.6% and 6.2% in the last quarter of 2020.
From the offer premium, all sectors of activity fell, except Services, which managed to advance 0.2%, with a 1.4% rise in commerce, transport and hospitality . Construction fell 4.2%; Industry, 2.1%; and Agriculture, 2%.
GDP registers the smallest year-on-year contraction since the first quarter of 2020
As for the year-on-year variation in GDP, it stood at -4.3% (the smallest contraction since the first quarter of last year, when the same data was recorded), a decrease at a much lower rate than in the last quarter of 2020 (-8.9%) but that already adds five negative.
At this point, domestic demand subtracted 2.6 points from year-on-year GDP, 3.6 points higher than in the fourth quarter of 2020, while external demand had a negative contribution of 1.6 points, 1.1 points more than in the previous quarter.
At current prices (taking into account the CPI), GDP fell 3.3% in the interannual rate, a rate 4.9 points lower than that registered in the fourth quarter of last year. Specifically, GDP at current prices stood at 287,407 million euros in the first quarter of 2021, a figure 2,621 million lower than that of the fourth quarter of 2020 and 28,426 million euros below that of the last quarter of 2019, when reached a historical maximum of 315,833 million euros.
343,000 full-time jobs are lost and hours worked fall 3.6% in the year
In year-on-year terms, employment fell by 1.9%, moderating the fall of the last four of 2020 by 3.3 points. The figure translates into the destruction of 343,000 full-time equivalent jobs.
In terms of compensation of employees, this presented a year-on-year growth of -3% in the first quarter, 1.5 points higher than the previous quarter as a result of a year-on-year evolution of -3.1% in the number of employees ( 2.2 points more than the previous quarter), and that the average remuneration per employee varied 0.1%, compared to 0.8% in the fourth quarter.
Regarding the number of hours actually worked, it decreased by 2% quarterly, 3 points less than in the previous quarter, and by 3.6% year-on-year. Productivity per hour actually worked fell 0.7% year-on-year in the first quarter, leading three down.
The Labor Force Survey (EPA) for the first quarter published on Thursday already foreshadowed the impact of the decrease in effective hours worked as a result of the coronavirus on GDP.
By sectors, the interannual variation rate of hours worked in the industrial branches stood at -6.5%, four tenths more than in the previous quarter, while in Construction, the interannual variation was 0.8% , with an increase of 5.4 points compared to the previous quarter.
The hours worked in the Services sector increased 2.4 points in their interannual variation compared to the previous quarter, to -3.9% and in the primary branches they presented a variation of 1.3%, with an increase of 2.7 points with respect to to the previous quarter.
The INE has warned that the review of the progress may lead to a greater difference between the advanced GDP and the confirmed GDP given the difficult comparison between the situation of March 2020 (with half of the month under severe confinement) and that of March 2021.
Recession in the euro zone
This Friday it was known that the Eurozone has entered recession again due to the measures against the pandemic. The euro zone economy suffered a GDP contraction of 0.6% between January and March, dragged down by Germany, its greatest economic power, which in the first quarter has fallen by 1.7% as a result of the severe restrictions applied since the beginning of anus.
In turn, the economy of the European Union as a whole (EU) also entered recession again, registering a GDP contraction of 0.4% this first quarter of the year, after the 0.5% fall between October and December 2020.
Italy also had a bad start to the year, with a decline of 0.4%. France, which closed 2020 with a quarterly drop of 1.4%, has nevertheless saved the first exam of the year with a moderate growth of 0.4%, thanks to the boost in domestic demand due to the relaxation of some measures that were more restrictive at the end of 2020.
Other known data are those of Portugal (-3.3%), for the moment the biggest contraction in GDP and Latvia (-2.6%). On the contrary, the EU economies that grew the most at the start of the year were Lithuania (+ 1.8%) and Sweden (+ 1.1%).
The scenario in Spain confirms that the recovery will have to wait. The trend that began after the rebound in the third quarter and the ‘miracle’ in the fourth, where growth was zero but the decline was avoided, has been broken in this first quarter of the year, hit by the third wave of coronavirus and with a campaign of slower-than-expected vaccination, which is postponing the lifting of restrictions that hold back the economy.
The government’s decision to delay the recovery followed reviews by organizations such as the Bank of Spain or AIReF, which worsened their estimates in anticipation of a bad first quarter and shifted the start of the recovery to the second. In the case of Spain, the greatest impact on GDP was recorded in the second quarter of 2020, sinking almost 18% compared to 5.2% in the previous quarter.
After knowing the advance data, the General Council of Economists has decided to maintain its GDP growth forecast at 5.6% for 2021 and 5.4% for 2022 by trusting in a second quarter of moderate growth thanks to containment of the fourth wave and the highest vaccination rate.
It has lowered to 15.5% its estimate of the unemployment rate for the end of the year, based on the fact that the temporary employment regulation files (Erte) last until December 31 and that the European funds arrive in the last quarter of the year.