Spain's Economy Grows 0.6% in Q1 as Investment and Exports Lose Momentum

Madrid | EcoPulse24

Spain Confirms Another Quarter of Economic Growth

Spain's economy expanded 0.6% quarter-on-quarter in the first quarter of 2026, confirming the preliminary estimate and extending the country's growth streak, according to official national accounts released by the National Statistics Institute (INE).

The quarterly expansion followed 0.8% growth in the final quarter of 2025, indicating that economic activity remained resilient despite a moderation in momentum.

On an annual basis, GDP increased 2.7%, matching both the preliminary estimate and the pace recorded in the previous quarter.

Domestic Demand Continues to Support Growth

Household consumption remained one of the principal drivers of economic activity, rising 0.6% during the quarter, although at a slower pace than the 0.9% increase recorded in the previous three months.

Government consumption also returned to positive territory, increasing 0.4% after contracting 0.9% in the fourth quarter of 2025.

The figures suggest that domestic demand continued to underpin Spain's economic expansion even as overall growth moderated.

Investment Loses Momentum

Business investment weakened noticeably during the quarter.

Gross fixed capital formation increased only 0.4%, slowing sharply from 2.1% in the previous quarter.

Investment in machinery and equipment contracted 1.9%, reversing the 6.3% increase recorded in the final quarter of last year, pointing to softer capital spending by businesses.

External Trade Weighs on Growth

Spain's external sector also lost momentum during the quarter.

Exports declined 0.6%, reversing the 0.7% increase recorded in the previous quarter, while imports fell 1.0% after rising 1.2% in late 2025.

The decline in both exports and imports suggests a softer external trade environment entering 2026.

Labour Market Remains Resilient

Official national accounts also showed that the labour market continued to expand despite slower economic growth.

Full-time equivalent employment increased 0.8% quarter-on-quarter, while hours actually worked declined 0.3% during the period.

On an annual basis, employment measured in full-time equivalent jobs grew 2.8%, highlighting continued resilience in Spain's labour market.

Bank of Spain Maintains Growth Outlook

Looking ahead, the Bank of Spain expects the economy to expand by 0.5% to 0.6% in the second quarter and forecasts full-year GDP growth of 2.3% in 2026, followed by 1.7% in 2027.

EcoPulse24 Data Snapshot

EcoPulse24 Analysis

Spain's first-quarter figures suggest that the economy remains one of the more resilient performers within the euro area, but the composition of growth is evolving.

Domestic demand continued to support activity, with household spending remaining positive and public consumption returning to growth. At the same time, the sharp slowdown in business investment - particularly the contraction in machinery and equipment spending - indicates that companies have become more cautious about expanding productive capacity.

The external sector also softened as both exports and imports declined, pointing to weaker international demand and slower trade activity. However, the continued expansion in employment, despite a decline in hours worked, suggests that labour market conditions remain relatively robust.

Taken together, the official data indicate that Spain entered 2026 with solid economic momentum, although future growth may increasingly depend on whether private investment and external demand regain strength during the remainder of the year. The Bank of Spain's forecast for continued expansion in the second quarter supports the view that the current moderation reflects a cooling in the pace of growth rather than a deterioration in underlying economic conditions.