Spain's domestic demand-led boom in Q1

The Spanish statistical office should confirm the strong Q1 GDP growth figure (0.9% qoq) while publishing the details of the expenditure components. On the back of lower oil prices and car purchase incentives, consumption was likely the main contributor to growth, adding 0.6pp. Investment was most likely robust in Q1, rising by 1.0% qoq and contributing 0.3% to growth as companies re-adjusted to stronger domestic demand. Despite the weak euro and past competitiveness gains, net exports probably put a drag on growth in Q1 as imports picked up substantially.

Looking ahead, GDP growth is set to remain robust - albeit not as strong as in Q1 - especially as personal and corporate income taxes support income. However, the impact of lower oil prices will gradually fade, leading to a slowdown in disposable income growth and hence consumption. Uncertainties related to the looming elections may also weigh on investment (and hiring) decisions during H2 15.