Stronger-than-Expected Expansion Driven by Investment
Spain’s economy grew 0.7% in the second quarter of 2025, surpassing analyst expectations and outperforming most major eurozone peers. The National Statistics Institute (INE) reported the quarterly growth figure on Tuesday, showing an acceleration from the 0.6% expansion recorded in the first quarter. On an annual basis, GDP rose 2.8%, ahead of the 2.5% growth predicted by economists surveyed by Reuters.
Economy Minister Carlos Cuerpo attributed the solid performance to a rebound in investment, particularly in housing, as well as resilient consumer spending. He noted that investment, previously sluggish during the recovery phase, had now started contributing more significantly to economic momentum.
Services, Construction, and Manufacturing Fuel Growth
The INE highlighted that services led the quarter-on-quarter expansion, supported by robust activity in retail, lodging, and transportation. Construction and manufacturing also posted gains, while agriculture experienced a contraction. The combination of sectors contributed to a broader uptick in domestic output, reflecting a more balanced recovery across industries.
In parallel, Spain’s labor market showed improvement, with the unemployment rate falling to 10.29% — the lowest level since early 2008. This decline in joblessness reinforces the view that domestic demand is being supported by a more active labor force and higher consumer confidence.
Demographics and Tourism Play Key Roles
According to economists, Spain’s growth is being reinforced by demographic shifts and a vibrant tourism sector. The country is benefiting from a positive feedback loop between immigration, job creation, and household consumption. This dynamic sets Spain apart from other large European economies where growth has been more modest.
Tourism, a long-standing pillar of the Spanish economy, continues to drive services-related activity. The summer travel season is expected to further boost third-quarter figures, providing additional momentum through hospitality and transportation services.
Spain’s Performance Stands Out in Sluggish Eurozone
Spain’s strong second-quarter performance contrasts with more subdued expectations across the eurozone. Analysts expect GDP growth in France and Italy to come in at just 0.1%, while Germany’s economy is forecast to contract by 0.1%. Overall, the eurozone’s GDP is projected to remain flat, underscoring Spain’s divergence from regional trends.
As second-quarter data for other euro area economies are released, Spain’s results position it as one of the bloc’s most resilient performers, driven by internal demand, sectoral diversity, and favorable demographic trends.
