Reactivating national demand has taken on a decisive role in the recovery, enabling the rebalancing of the internal and external components of expenditure. This change in the dynamics of domestic expenditure compared with events during the crisis years is in response to a series of factors, including most notably the growing normalisation of financial conditions, headway in the construction of the Banking Union, favourable developments in the labour market and the unquestionable improvement in confidence. Against this backdrop, both private consumption and business investment have regained momentum, underpinned by the improvement in the financial environment. Mention should also be made of the role being played by investment in construction, which might begin to turn around in 2015 or 2016. Recent developments in house prices are along the same lines, although certain caveats should be voiced: for the first time in six years, growth rates in the aggregate domestic indices of real estate prices are close to zero, or slightly positive, although significant differences across regions remain. Since the crisis began, spending by private agents has been constrained by the need to reduce the high levels of debt built up during the expansion that ran to 2008. Recently, there has been progress in private sector deleveraging, while the attendant restrictive effects on spending are being mitigated by a shift in lending flows towards more creditworthy agents and, in particular, towards companies better placed to commit to new investment projects.
2  BIS central bankers’ speeches  In recent years, goods and services exports have been the engine of our economic activity, against a background of marked weakness of domestic private expenditure and contained imports from the rest of the world. During 2014, foreign trade flows have undergone changes of some scale, as a result of the loss of steam in our export markets (in the emerging economies and, since the spring, in the euro area alike) and the acceleration in imports as the recovery progressively took hold. As a result, the contribution of the external sector to GDP has declined appreciably and the pace of adjustment of the external imbalance has been less rapid than expected. Conceivably, some of these developments are temporary and will be reversed, in part, in the coming months. Moreover, the depreciating trend of the euro may help improve the external balance in the near future. However, the weakness of the euro area, along with the high sensitivity of our imports to changes in final demand, highlight the need to further improve the competitiveness of our economy. As regards inflation, the Spanish economy is currently posting very low rates. This partly reflects temporary factors, but also structural factors that account for the subdued tone of core inflation. Inflation rates have been trending downwards for months throughout Europe, and Spain is one of the euro area countries that has moved most markedly in this direction. We can argue about the advantages and disadvantages of a price situation such as that described.