The Catalan economy's growth slows in July and September

BarcelonaThe Catalan economy moderated its growth rate in the third quarter of 2021, despite maintaining an upward trend. Between the months of July and September this year, the gross domestic product (GDP) of Catalonia increased by 0.7% over the previous quarter, a figure significantly lower than the 3.3% recorded between April and June, according to data released Friday by Idescat, the Generalitat's statistical agency. Compared to the third quarter of 2021, the Catalan economy grew by 3.4%.

It was the service sector which was at the forefront, recording an year-on-year increase of 5.1%, although the revival of services occurred mainly in the previous quarter, when restrictions on the hospitality and leisure industry began to be lifted.

However, the 0.7% Catalan growth was well below the 2.2% Spanish average, advanced by the National Statistics Institute (INE) last week. One factor explaining this is that the contribution of services, which account for almost three-quarters of the Catalan economy, could have been much larger had it not been for the poor tourist season in July and August, which had a direct impact on foreign tourist arrivals. The collapse of international tourism is not a new phenomenon. "The collapse of international tourism is far from being compensated" by the good performance of domestic tourism, both Catalan and Spanish", explains Albert Carreras, professor of economics at the UPF and president of the commission of Catalan economy at the Col·legi d'Economistes

The downturn in foreign tourism has not affected the interior as much, which are more dependent on domestic visitors and where, moreover, the sector plays a smaller part. It has, however, affected the two major Catalan tourist markets: the city of Barcelona and the coastal towns that offer sunny beach. According to Carreras, both had a much worse season than expected. In fact, both in coastal towns and the Catalan capital there were many businesses, especially hotels, that could not reopen because they did not have enough customers.

"The beach season has simply not existed," adds the professor, who nevertheless points out that since September tourism in Barcelona has been "recovering", although coastal regions will no longer rebound during the autumn and winter.

The industry grows despite the shortages

Beyond services, other sectors also maintained an upward trend. Construction grew by rear-on-year 1.1% this quarter, while agriculture did so at a more moderate pace of 0.8%. On the other hand, industry increased by 3.3%. The INE has also published data on industrial production last September. In Catalonia, industrial production increased in September by 3.3% year-on-year, higher than the 1.9% recorded in Spain as a whole (which is 1.2% if the data is corrected for seasonality). The data published by Idescat are provisional. The Catalan statistical institute will release its final figures on December 13.

"The demand pulls with enormous force," says Carreras. This is good news for Catalan industry, which is suffering from the "supply problems" that have affected industry worldwide. The logistical imbalances in the international transport of goods, the shortage of raw materials in the face of the reactivation of the demand and the bottlenecks in the production of intermediate goods and components have slowed down the production all over the planet, also in Catalonia. Despite this, Carreras recalls that the Catalan industry is "less exposed to the value chains that go through China and Southeast Asia", which is the hot spot of the shortage: this is the region of the world where most components used in developed countries' industry are manufactured, where the final high added value products of are made. In addition, these countries apply much stricter lockdown policies and movement restrictions when cases of covid infection are detected, which negatively affects production.

A good example of this is the automotive industry: the lack of microchips, manufactured in Asia, has forced companies such as Seat to stop some lines, while other sectors –for example the food industry– have not been so affected. On the other hand, in countries like Germany, which depend much more on the arrival of Asian components, the problems of shortages "are doing a lot of damage" and have had an impact three times larger than in Catalonia.

In addition to the imbalances in the supply, we must add an increase in industrial costs due to rising energy prices, such as electricity and natural gas. But despite the problems, "the power of demand is so strong" that the industry will continue to grow, Carreras concludes.