INE confirms Spanish GDP grew 0.6% in Q1, decelerating from 0.8% as Iran war weighs

Growth driven by domestic demand

Spain's GDP rose 0.6% quarter-on-quarter in the first three months of 2026, the Instituto Nacional de Estadística (INE) confirmed on Thursday. The figure marks a deceleration from the 0.8% recorded in the final quarter of 2025. Domestic demand contributed 0.5 percentage points to the quarterly expansion, while the external sector added just 0.1 points. Household consumption grew 0.6%, moderating by three tenths from the previous period, and public spending accelerated to 0.5%. Investment (gross fixed capital formation) slowed sharply to 0.4%, its weakest reading since the third quarter of 2024.

Domestic demand0.5

External demand0.1

Domestic demand

0.5 pp

External demand

0.1 pp

Data from the article text

War impact and government response

The conflict in Iran, which began on 28 February, affected the economy only partially during the quarter, mainly through energy price rises and inflation from March onward. The government approved a package of anti-crisis measures on 20 March to cushion the shock for households and businesses.

“Household consumption is consolidating as one of the main drivers of the economy, with a quarterly advance of 0.6%, supported mainly by the strength of the labour market, in a start to the year marked by the impact of the war in Iran on inflation since February. The measures approved by the Government on 20 March are cushioning the damage of this new energy shock on households and companies.”

Analyst warnings on front-loading

Raymond Torres, director of cyclical analysis at Funcas, pointed to a phenomenon of front-loading of orders by companies in March, as businesses rushed to secure supplies after the outbreak of the Middle East conflict. This behaviour was reflected in confidence indicators such as the PMI, which contracted in April for the first time in two and a half years. Torres warned that the build-up of inventories and advance orders could lead to a downward adjustment in the second quarter once the precautionary effect fades.

“There was a phenomenon of front-loading of orders by companies during March.”

Labour market and productivity

Employment continued to show exceptional resilience, acting as a shield against geopolitical instability. The Ministry of Economy highlighted a 1% quarterly rise in productivity per hour worked, the best figure since the start of 2025, and a 0.6% year-on-year increase, consolidating an unusual cycle of productivity gains alongside record job creation.

Outlook and upcoming decisions

Year-on-year GDP growth accelerated to 2.7%, one tenth higher than in the fourth quarter of 2025, keeping Spain as the fastest-growing major eurozone economy. The Bank of Spain last week projected growth of 0.5–0.6% for the second quarter and 2.3% for the full year. The government will use the data at Monday's Council of Ministers meeting to update its macroeconomic framework, the first step in drafting the budget, and to renew the war-related aid package that expires on 30 June. Underlying inflation stood at 3% in May, and analysts caution that rising fuel prices and international volatility could eventually weigh on consumption and exports.