MacroEconomic Bulletin - July 2022



· China's growth slows in the second quarter. The restrictive restraints imposed by the Chinese government have affected its economy, growing only +0.4% year-on-year in the second quarter of the year, its lowest level in two and a half years, which could have a negative spillover on global growth due to the importance of its economy.

· United States: GDP declines in the second quarter while the FED continues to raise rates. After a contraction of -0.4% in the first quarter, or -1.4% on an annualized basis, the US economy contracted again in 2Q2022 by -0.2% (-0.9% year-on-year), which would place the country in technical recession - two consecutive quarters of decline-. On the other hand, the FED continues its battle against inflation and raised rates again by 0.75 basis points, placing the interest rate between 2.25%-2.5%, which would still be considered neutral -between 2% and 3% for the United States- although future hikes at the next meeting in September are not ruled out, leading monetary policy to tighten.

· ECB raises interest rates, more than initially expected but in accordance with our forecast. At its July meeting, the ECB announced the anticipated rate hike, which it set at an increase of 0.5 basis points, above the expected moderate rise of 0.25 basis points. However, it has already announced a new mechanism to control fragmentation in the debt markets and soften the impact of this measure on the most indebted countries of the Eurozone.

· The IMF again downgrades growth generally for 2022 and 2023 in the July 2022 World Economic Outlook. High global uncertainty, rising prices, gas supply pressures, tighter monetary policy and slowing growth in China and the US lead to a downgrade of global growth to +3.2% yoy in 2022 (0.4 pp below the April forecast) and +2.9% yoy in 2023 (0.7 pp below). Similarly, the IMF forecasts Eurozone growth at +2.6% yoy in 2022 (-0.2 pp) and +1.2% yoy in 2023 (-1.2 pp).


Despite a macroeconomic environment marked by uncertainty, Spanish GDP rebounded in 2Q2022, presenting a quarter-on-quarter growth of +1.1% (1st estimate) and +6.3% year-on-year. These figures are well above the consensus estimate (+0.4% quarter-on-quarter) and EthiFinance Ratings (+0.9% quarter-on-quarter). The positive performance is mainly due to the upturn in private consumption after the drop in the first quarter, as well as the favorable evolution of tourism. We maintain our GDP forecast for this year at 4.3%.

Likewise, the labor market continued to evolve favorably in the second quarter, with a quarter-on-quarter increase of 1.9% in the number of employed persons, which was generalized in all sectors except agriculture, and with a notable increase in the number of permanent contracts. Similarly, the unemployment rate fell to 12.4% of the labor force.

Nevertheless, price escalation remains one of the main risks to the Spanish economy. The CPI rose to +10.8% yoy in July (Flash estimate; +10.2% in June), although it showed a month-on-month moderation (-0.2% mom vs. +1.9% in June). Core inflation presented a similar trend, increasing to +6.1% yoy (+5.5% in June). In addition, other data regarding the evolution of prices have been released, which point to inflationary pressures coming from industry and imported products will continue in the coming months. In this sense, both the Industrial Price Index (+43.2% yoy) and the IPRIM (+30.4%) and IPRIX (+21.8%) -referring to imports and exports- increased in June.


French GDP grew in the second quarter of the year (+0.5% quarter-on-quarter) following the decline in the first quarter. This recovery was supported by improved external demand, while consumer spending continued to slow, albeit at a slower pace than in the first quarter. As for the third quarter, both consumer confidence and business climate continued to worsen in July.

In addition, inflation continued to rise, reaching +6.1% yoy in July (Flash estimate; +5.8% yoy in June). This increase has been mainly influenced by the rise in the price of services, food and manufacturing products, while energy prices have slowed down.

Finally, on the fiscal front, in Q1 2022 general government debt increased up to 114.5% of GDP after the slight fall showed in the previous quarter (112,5% GDP). This figure, according to the last IMF and Bank of France forecasts, is expected to remain at 112% GDP at the end of 2022 followed by a slight decline until 2024, but still above the 100% mark and far away the 60% Maastricht definition, in a particularly risky scenario due to the reactions seen a couple of weeks ago in the risk premiums of some European countries, which may jeopardize the sustainability and repayment capacity of the debt in the future.


After the positive performance of the Portuguese economy in the first quarter of the year, where it registered a quarter-on-quarter growth of +2.5%, it declined in 2Q2022, falling by -0.2% qoq. However, year-on-year growth remained positive (+6.9% yoy vs. +11.8% in 1Q2022). This decrease was due to the negative contribution of domestic demand, while external demand contributed positively, favored by the evolution of tourism. Regarding the labor market, monthly data for June was also released, which remained partially stable, with an unemployment rate of 6.1% in June (6.0% in May).

With respect to the third quarter, both industry and tourism performed favorably, with increases of +3.7% in industrial production and +97.3% in the number of visitors. Likewise, after the worsening of expectations in June, these improved in July, with increases in both consumer confidence and the economic climate indicator.

In addition, July CPI Flash estimate has been published, which remains on an upward trend and stood at +9.1% compared to +8.7% in June, while core inflation follows a similar trend, standing at +6.2% yoy (+6.0% previously). Similarly, Industrial Production Prices Index continued to soar in June at 25.7%, a trend that, despite being highly influenced by energy and raw material prices, already shows high variations without taking them into consideration (10.9% yoy).