Extracts from The Bank of Spain Quarterly Report on the Economy
During the third quarter, the gradual improvement in the Spanish economy seen since the beginning of the year continued, against a background of some easing in financial tensions and improved confidence. On the estimates made on the basis of the conjunctural information available, in the July-September period GDP grew by 0.1% quarter-on-quarter, following nine consecutive quarters of decline. However, in terms of the year-on-year rate of change, which measures the conjunctural situation with a lag, output fell by 1.2%. On the expenditure side, the decrease in domestic demand was similar to that in the previous quarter (0.3% quarter-on-quarter), while the contribution of net external demand to output rose by 0.4 pp.
The rate of decline of employment eased significantly in this period. A small quarter-on quarter reduction of 0.1% (-3.1% in year-on-year terms) is estimated which, if confirmed, would be the least unfavourable rate recorded since the start of the crisis. At the same time, wage restraint is estimated to have continued. In conjunction with productivity, which is expected to slow slightly to 2% year-on-year, this would reduce unit labour costs further. Also, as approximated by the 12-month increase in the CPI, inflation posted a much greater- than-expected slowdown in Q3, especially in September, to stand at 0.3% (as against 1.5% in August). The stripping out from the index of the base effects of the increase in VAT rates and of the rises in administered prices in September 2012 explain most of this fall, although some unanticipated declines in the prices of unprocessed foods led to a further fall in the CPI in this latter month. With regard to economic policy, in September Parliament approved the Law to support entrepreneurs and their internationalisation, which seeks to foster business activity, innovation and the internationalisation of firms. The draft State budget for 2014 was sent to Parliament and two reports arising from the strengthening of fiscal-policy oversight at the European level to the European Commission: the Effective Action Report and the 2014 Budget Plan.