Spain's labour market continues to be strong in Q4 15

Spanish job market data surprised significantly to the upside in November. The number of registered unemployed dropped markedly by 27.1k over the month (consensus: -6.5k), the sharpest decline since the creation of the series. Unemployment decreased in all activity sectors and the total number of unemployed stood at the lowest level since December 2010. Meanwhile, new social security affiliations rose by 1.62k in November, one of the highest annual increases (3.2%) since 2006. Many of the new social security affiliations were in the education and retail sectors. Another bright spot of the release was that full-time permanent contracts grew by over 14% from January to November, compared to the same period of 2014.

As the labour market conditions carry a significant weight in our tracking models of economic activity, and given the positive surprises, Q4 15 GDP growth estimate is slightly revised upwards from 0.6% q/q to 0.7% q/q. 2015 forecast remains unchanged at 3.1% y/y, but the carryover effect implies a slightly higher growth in 2016 of 2.7% y/y (+0.1pp).

"We still look for a modest economic activity deceleration at the end of the year/beginning of 2016, given uncertainties related to general elections. We continue to expect private consumption to remain the primary growth engine, and our view is reinforced by this strong labour market report and the latest solid retail sales data. Investment recovery should remain on track and the net trade contribution to growth should still be slightly negative but close to nil", says Barclays.