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Economy in Brief

Spanish GDP Growth Maintains Firm Pace; Chain-Linking Introduced
by Carol Stone May 25, 2005

GDP in Spain grew 0.9% in Q1, the same as in Q4, according to the quarterly data released this morning by the National Statistics Institute. Boosts to the quarter's performance came from government consumption, up 2.6%, and a drop in imports of 1.6%. Household consumption grew 0.6%, slower than in Q4, and capital formation also expanded more slowly. Exports decreased 1.7%, their second successive decline, pulling them down 2.5% compared to a year ago. However, an accompanying decrease in imports stabilized the real net export balance with the Q4 amount.

In today's report, Spain has switched to chain-linking for calculating quarterly real growth and inflation; the reference year for these calculations is 2000. The data previously used fixed 1995 weights. [Some annual data on the new basis were reported last week.] As seen in the graph and in the table below, growth is consistently higher in the new figures. In 2002 and 2003 this resulted from stronger gains in fixed investment, but through the last year or so, household consumption has been much more vigorous than under the former calculation scheme.

In the US experience, chain-weighting has a different impact: it tends to reduce total growth and, in particular, that of investment expenditures. It dilutes the effect of heavier buying of equipment, for which prices are falling. But in Spain, the reported volume of investment spending has been raised, perhaps because of the sizable role of construction in the Spanish economy. Construction is a considerably larger share of nominal GDP, 16.7% in Q1, than in the US, 10.2%. Construction prices have increased relative to total GDP, so that item has generally benefited from the chain-weighting process. Its greater weight in turn gives more lift to the total chain-weighted GDP result.

  Q1 2005 Q4 2004 Q3 2004 Year/ Year 2004 2003 2002
GDP - 2000 Prices 0.9 0.9 0.7 3.1 3.1 2.9 2.7
Memo: GDP - 1995 Prices -- 0.8 0.6   2.7 2.5 2.2
Household Consumption 0.6 1.7 1.4 4.6 4.4 2.5 2.8
Gross Fixed Capital Formation 0.9 3.4 2.2 6.5 4.4 5.3 3.3
Exports -1.7 -0.8 1.4 -2.5 2.8 3.6 1.8
Imports -1.6 1.6 3.5 5.5 8.1 6.3 3.8
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