Commodity economic buzz

The Spanish economy contracted by 0.4% in the third quarter of 2012 amid challenging economic conditions and persistent government austerity measures, according to a latest report from the Bank of Spain today. The contractionary course on which the Spanish economy had embarked a year earlier continued in the central months of the year, in a setting marked by financial conditions that were adverse though somewhat slacker than in the previous quarter, the bank noted.

The as-yet incomplete conjunctural information available suggests that GDP declined at a quarter-on-quarter rate of 0.4%, similar to that in Q2. The profile of demand during the quarter was affected by spending decisions being brought forward in light of the VAT rise announced for 1 September. National demand fell at a somewhat lower rate than in the previous quarter (-1.2% against -1.4%), as a result of more moderate declines in all the private components of expenditure, in particular in household consumption, where the above-mentioned VAT effect was concentrated.

The contractionary trajectory of government consumption is expected to have intensified while employment is estimated to have contracted at a similar rate to the previous quarter (at around a year-on-year rate of -4.5%). Spain in Eurozone's fourth-largest economy, which had barely emerged from the last recession at the end of 2010, started to contract in mid-2011.