Spain slows growth slightly while inflation continues to fall

BarcelonaThe Spanish economy closed the first quarter of 2025 with a slight slowdown in its growth, although it remains at levels well above the European average. Furthermore, the State recorded a slight drop in inflation this April, bringing it even closer to the rates considered optimal by the European Central Bank (ECB).

Specifically, Spanish gross domestic product (GDP, the indicator that measures a region's economic activity) increased by 0.6% between January and March, two-tenths below the figure recorded in the previous quarter, according to data released Tuesday by the National Statistics Institute (INE). Compared to the same period in 2024, growth was 2.8%. By comparison, the eurozone countries as a whole closed last year with an annual increase of 0.9%, significantly lower.

This progress maintains Spain as the eurozone's leading economy, with more robust economic growth levels, especially when compared to countries with higher GDPs, such as Germany, France, and Italy, which have recorded more modest growth over the past two years or, in the case of Germany, are in recession.

Household consumption and the positive performance of investment were the main drivers of the expansion in activity during the first quarter, although all branches of the economy, including the foreign and public sectors, recorded growth during the first quarter. Specifically, household consumption rose 0.4% compared to the previous quarter; government spending, 0.2%; and investment, 0.6%. Compared to the same period last year, all three elements increased by more than 3%, figures that maintain Spanish GDP on an upward path similar to that of the past two years.

Exports of goods and services (including spending by foreign tourists in Spain) also grew, in this case by 1% quarterly, and at a faster pace than the 0.7% increase in imports. In fact, the foreign sector contributed two-tenths of the six-tenths of GDP growth in the first quarter, while the remaining four-tenths correspond to domestic demand. However, compared to a year earlier, domestic demand contributed 3.2 percentage points to GDP growth, while foreign demand subtracted 0.4 (giving this increase of 2.8%). This negative contribution from the foreign sector coincides with the start of the new trade war launched by US President Donald Trump, which has caused a slowdown in international trade and negatively impacted economic activity in many countries, including among Spain's main trading partners in the European Union.

In this sense, compared to the first quarter of 2024, exports grew by 2.1%, 1.1 percentage points less than in the fourth quarter. Imports also slowed, in this case by three-tenths, compared to the last three months of last year, increasing by 3.6% year-on-year. This demonstrates the growing trend of the Spanish foreign sector, but at the same time also highlights the difficulties that the international economy is increasingly experiencing due to the tariff increases announced by Washington.

By industry, industry increased its activity by 1.1%, with the manufacturing subsector increasing by 0.8% quarterly, while construction increased by 0.4%. The decline continues.

Regarding inflation, the consumer price index (CPI, the indicator that measures the cost of living) will close April with a 2.2% increase compared to the same month last year, one tenth of a percentage point less than in March, according to data also released by the INE (National Institute of Statistics and Census). This brings the year-on-year rate even closer to the 2% threshold, which the ECB considers the long-term target. The decline in the cost of gas, electricity, and, to a lesser extent, fuel explains the drop compared to a year ago, although the price of leisure and cultural products and services drove the cost of living higher.

The downside was the monthly increase in prices, which shot up 0.6% this month, the highest figure since last October.

As for core inflation (which excludes the most volatile items, such as fresh food and energy), it was 2.4% annually, once again above the overall CPI growth rate, something that hasn't happened since October of last year. The INE will publish the final and expanded CPI figures for April on May 14, when it will also break them down by autonomous community.