Spanish Q2 export jump delivers GDP boost

Spain's gross domestic product expanded at a slightly slower in the second quarter of the year, as government spending registered a sharp contraction.

The Mediterranean country's gross domestic product grew at a 0.8% quarter-on-quarter pace over the three months to June, according to Spain's statistical office, INE, the same as over the preceding three quarters but below the 1.0% clip recorded in the same quarter of 2015.

INE had initially pegged the second quarter rate of GDP growth at 0.7%.

In comparison to a year ago, GDP sped ahead at a 3.2% pace, down from a rate growth of 3.4% in the first quarter of 2016.

Public spending fell by 1.6% quarter-on-quarter after a rise of 0.7% over the previous three months, while the rate of growth in household spending slowed from 1.0% to 0.7%.

Net trade on the other hand contributed 0.6 percentage points to the quarterly rate of GDP expansion, as exports surged by 4.3% over the quarter, more than compensating for a 2.7% increase in imports.

Meanwhile, gross capital formation bounced back from the previous quarter, rising by 1.3% after a 0.3% gain in the prior three months.

Despite the better-than-expected news on the economic front, the country continued to face a political impasse given the failure of the main parties to form a new government, risking falling afoul of the European Commission's 15 October deadline for Madrid to put in place measures to reign in its fiscal deficit.

According to Barclays Research, the Socialist PSOE party was unlikely to support the creation of a coalition government before the next regional elections on 25 September in the Basque country and Galicia.

Without the support or at least the abstention of the PSOE delegates's in the Spanish parliament, the country's two centrist parties, PP and Ciudadanos, would be unable enough votes to form a government, possibly triggering a third round of elections.