Spain's Economy Loses Some Shine as Growth Misses Forecast
Spanish Economy Loses Shine as Growth Slows More Than Forecast
(Bloomberg) -- Spanish economic growth slowed more than expected in the second quarter, adding another layer of gloom to an increasingly fragile situation in the euro region.
The figures suggest some cracks have appeared in the economy, which for years has been among the fastest growing in the bloc. But a quarterly expansion of 0.5% still far outpaces the euro zone. Figures due later on Wednesday are expected to show growth there cooled to 0.2%.
After months of political stalemate in the euro area’s fourth-largest economy, the clock is ticking for acting Prime Minister Pedro Sanchez to cobble together the support he needs to form a new government after his first attempt failed earlier this month. Spanish infrastructure group Ferrovial SA said Tuesday it has noted a slight slowdown in its domestic sales -- partly because of the “uncertain political environment.”
Growth in both industrial production and investment weakened in the second quarter. Output in retailing, transport, hotels and restaurants was flat after making a strong contribution in the first. Bloomberg Economics’s Maeva Cousin noted before the release that lower tourist numbers in May might weigh on the sector’s performance.
For more insight from Bloomberg Economics, click here
The figures come in a busy week for euro-area economic news. Most have disappointed.
Reports on Tuesday showed economic growth in France slowed and euro-area economic confidence fell to the lowest in more than three years. Data on euro-zone unemployment and inflation are scheduled for release on Wednesday.
Much of the slowdown engulfing Europe is linked to manufacturing and global trade tensions, with German industry hit particularly hard. Concern about those vulnerabilities has prompted European Central Bank President Mario Draghi to hold out the prospect of more monetary stimulus to shore up the economy -- including an interest-rate cut further below zero as soon as September.
That could be good news for some borrowers but an unwelcome hit to European banks’ profitability.
“We think low interest rates are good and desirable,” Bankia SA Chief Executive Officer Jose Sevilla said Tuesday. “What we don’t think is good is that there are negative interest rates.”
The Spanish lender said it won’t meet its published goal for 2020 profit because of negative rates. The bank will give a new profit outlook by year-end.
--With assistance from Harumi Ichikura.
To contact the reporter on this story: Jeannette Neumann in Madrid at jneumann25@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Jana Randow
©2019 Bloomberg L.P.