BBVA Research

Output growth moderated in the past few months, but this should be transitory. As a result, economic activity would grow 3,6% in 2018. Next year, strong mining investment would drive output growth up to 3,9%. Hence, there are no changes in our forecasts, but we are now considering higher private sector spending and lower from the public sector.

Nonfinancial corporate debt-to-GDP is high, but debt-to-assets and debt-to-earnings remain moderate. Solid earnings, tax cuts and low real interest rates allow corporations to service their debt without problems. However, tighter financial conditions, a slowdown in profit growth and higher risk aversion will lead to higher debt distress and deterioration in credit quality.

Highlights: EBA publishes stress tests results. ESMA issues RTS preparing for a hard Brexit. ESAs consult on guidelines for AML/CFT and on changes to PRIIPs. Council issues conclusions on climate finance. OJEU publishes RTS on benchmark regulation. BdE issues financial stability report. US Agencies issue consultation to simplify regulatory reporting for small institutions.

The Spanish real estate market continues to perform well. Job creation intensified in October, confidence rose in September and financial conditions remain favourable. Home sales thus grew in August and, while approvals suffered a bit of a correction that month, residential investment has risen substantially in Q3 2018.