Spain's Cracks Are Starting To Show

[mattyfc]

http://www.ftadviser.com/FTAdviser/Regulation/News/article/20110518/f111632c-8155-11e0-8195-00144f2af8e8/Spains-cracks-are-starting-to-show-warns-thinktank.jsp

Ben May, European economist, said although household spending was unchanged in Q1 after posting "healthy quarterly rises" in 2010, "real" labour incomes are set to "fall sharply" this year.

He said: "This, coupled with tighter fiscal and monetary policy, is likely to prompt households spending to fall outright over the remainder of the year."

Mr May said investment had also continued to rise and had it not been for a 1.4 per cent rise in government spending, overall GDP would have been "rather weaker".

Mr May warned this suggested there could soon be a wave of announcements indicating that the underlying health of the regional finances was "worse than the official figures suggest" and that "huge spending cuts" over rest of 2011 may be required to meet budget targets.

He said: "The upshot is that we suspect that the second-half of this year will be a tough one for Spain, particularly if next month's bank stress tests spring a nasty surprise.

"Accordingly, the euro-zone debt crisis could be about to enter a much more dangerous phase."

Household spending unchanged in Q1, despite record falls in retail sales and 250k extra unemployed? Really?

1.4% Rise in government spending whilst reducing the deficit from 11% to 6%? One of these has to be wrong.

Exports to the rescue?

http://www.mt5.com/de/forex_news/quickview/1144588

The trade deficit actually got worse y/y by 3.3% and q/q there was a miniscule improvement. Assuming you actually believe the trade figures released. As long as the oil price stays high can’t see this improving much.

The GDP breakdown really makes no sense at all and does not fit with other data released. I will be interested to see how long this charade can be kept going before the inevitable plunge in to the abyss?

[Trampa501]

Actually there are plenty of signs that the economy has been getting better. Did you see the FALL in unemployment figures in April Matty? This is forecast to continue over the next few months. Incidentally if you choose not to believe the export or deficit figures, perhaps some of us (aware of the scale of the black market) can choose not to believe the unemployment figures?

Other good news - tourism figures are up substantially, perhaps benefitting from German/French tourism, and the troubles in other tourist countries eg Egypt, Tunisia. And the Brits are coming back too - surprising as the weather's been great in the UK, but maybe it's stil a lot cheaper to holiday in the Med than in Brighton. My guess is also that many were unable to fly out last year (Iceland volcano) so are making sure of their trip this year.

British numbers up to Balearics

The number of British tourists to arrive on the Baleares between January and April this year is up 25% higher than last year according to the regional tourism and employment department.

The four months saw 245,850 British tourists arrive on the islands, with the increase on Ibiza particularly strong, up 37.4%.

Data from the Spanish Airports Authority, AENA, shows that 214,035 British tourists arrived on Menorca, up 24.1%, and 8, 286 on Menorca, up 19.1% and 23,529 on Ibiza, up 37.4%.

And yes you are right to mention export figures. Not everyone believes the export growth can continue (see article below), and I suspect it depends on countries like Germany and even China continuing their strong performance.

Exports drive 1st quarter growth

Spanish exports continued to drive economic growth in the first quarter, offsetting a slump in domestic demand caused by the deepest austerity measures in three decades.

Exports rose 5 percent from the previous three months, when they expanded 3.9 percent, and grew 11.2 percent from a year earlier, the National Statistics Institute in Madrid said today. Household spending was unchanged from the previous three months, when it increased 0.3 percent. The economy expanded 0.3 percent from the fourth quarter and 0.8 percent from a year earlier, INE said, confirming an initial estimate from May 13.

The gain in exports is bolstering earnings at some of the country’s biggest manufacturers, while doing little to reduce the European Union’s highest jobless rate and boost domestic demand. Madrid-based Acerinox SA (ACX), the world’s largest stainless- steel maker, reported a six-fold increase in first-quarter profit on May 3 and said global demand allowed the company to be “optimistic” about the following three months.

I think the biggest danger at the moment is a slump in demand in their export markets. I agree that domestic recovery will be slow and painful, but it will come if exports and tourist numbers continue to rise. Incidentally, it'd be interesting to see the occupancy rate of the new fast train line from Madrid to Valencia (or the existing Madrid-Barcelona or Valladolid line). If people are able to pay those high fares (or the companies employing them are) then there is still a percentage of the population doing well. Not looking so good for unemployed youngsters - but like much of Spain's history in the last 50 years, they may well benefit from working abroad for a while. A couple of years back I knew a couple from Navarra who spent some time in Oxford (one working, the other studying English) before they went back home to work in their respective professions (med research and web design) and get married. Not the same for everyone, and I accept job opportunities are a lot scarcer in the south of the country.

[mattyfc]

Actually there are plenty of signs that the economy has been getting better. Did you see the FALL in unemployment figures in April Matty?

You mean the government propaganda put out. The April jobless claims figure was heavily affected by the timing of Easter this year. Luckily the Spanish government are kind enough to seasonally adjust the figures. Which then show a rise of 7110.

https://www.redtrabaja.es/es/portaltrabaja/resources/contenidos/estadisticas/datos_avance/datos/datos_2011/AV_SISPE_1104.pdf

http://translate.google.com/translate?js=n&prev=_t&hl=en&ie=UTF-8&layout=2&eotf=1&sl=auto&tl=en&u=http%3A%2F%2Fwww.rankia.com%2Fforos%2Feconomia-politica%2Ftemas%2F753272-abril-2011-paro-baja-64-309-personas&act=url

[Trampa501]

You mean the government propaganda put out. The April jobless claims figure was heavily affected by the timing of Easter this year. Luckily the Spanish government are kind enough to seasonally adjust the figures. Which then show a rise of 7110.

https://www.redtrabaja.es/es/portaltrabaja/resources/contenidos/estadisticas/datos_avance/datos/datos_2011/AV_SISPE_1104.pdf

http://translate.google.com/translate?js=n&prev=_t&hl=en&ie=UTF-8&layout=2&eotf=1&sl=auto&tl=en&u=http%3A%2F%2Fwww.rankia.com%2Fforos%2Feconomia-politica%2Ftemas%2F753272-abril-2011-paro-baja-64-309-personas&act=url

Ah - so if the figures are bad, we believe them 100% without taking into account Jan/Feb and March (if Easter's late) are traditionally poor months. And when there's an improvement, suddenly it's government propaganda. Get a grip old son, the figures are far too high, but luckily they'll continue to decline in the next few months - assuming the tourist figures are genuine and not made up. This may be seasonal factors, but at least it's good news for those who get work

[mattyfc]

Ah - so if the figures are bad, we believe them 100% without taking into account Jan/Feb and March (if Easter's late) are traditionally poor months. And when there's an improvement, suddenly it's government propaganda. Get a grip old son, the figures are far too high, but luckily they'll continue to decline in the next few months - assuming the tourist figures are genuine and not made up. This may be seasonal factors, but at least it's good news for those who get work

You can see the full year SA figures in the graph in the second link which I have put below. The pattern so far is almost identical to 2010 except with a start that is 150k higher. No doubt the claims figures will come down in the summer but the 150K + Gap looks like being maintained so far.

http://www.rankia.com/blog/upload/images/blogs/tasa-paro/paro2011.png

[RufflesTheGuineaPig]

I can assure you, unemployment will fall over the next month or so and the economy will pick up. 100% Guaranteed.

[Trampa501]

I've got a link showing some of the AVE figures for the Valencia and Barcelona lines. Obviously it's an industry piece and will only show the positive stuff, but some of the figures are very interesting. 5100 passengers use the Madrid-Valencia route daily. And in the first month of operation twice as many people used the service as per the previous slow train service. The Barcelona line, which has been going for 3 years, has now had 16.9 million passengers use the service

As per the UK, there's a sector in the economy doing very well, who can afford to pay for premium train services. Or indeed fill the stadiums in the Nou Camp or the Bernebeu to capacity The rest (which includes myself) could never afford this

Spanish language article AVE

[interestrateripoff]

Holiday season anyone?

[Trampa501]

You can see the full year SA figures in the graph in the second link which I have put below. The pattern so far is almost identical to 2010 except with a start that is 150k higher. No doubt the claims figures will come down in the summer but the 150K + Gap looks like being maintained so far.

http://www.rankia.com/blog/upload/images/blogs/tasa-paro/paro2011.png

My guess is that many youngsters will take the chance to work abroad - Germany claims it needs lots of workers. Not the ideal situation, but I wish I'd worked abroad at an earlier age. Ironically I've had better luck getting work in Spain the last couple of times I was there, than here in the UK (different job sectors though). I'm unable to do this now due to my partner's health.

[aa3]

How much does unemployment correlate to GDP nowadays.. Say if half the estate agents were fired in Britain. It would look bad on the unemployment numbers, but the remaining estate agents would simply make more sales on average.. so the GDP would remain the same.

In the same respect the mass downsizing at the big corporations over the last 2 years was just getting rid of dead weight. They were mainly hammering excess white colar workers who have been redundant for a decade, but hanging on with the good times.

The USA GDP is about back to 2008 levels, but with 12 million less workers than in 2008.

[Trampa501]

Meanwhile, the Spanish are still investing in the UK!

Mr Zara buys big

Founder of Spanish retailer Zara Amancio Ortega buys 1 acre site in West End

Amancio Ortega, the co-founder and former chairman of retail giant Inditex, is splashing out on a 1 acre “island site” on London’s Oxford Street for around £220m. Ortega is in talks to buy Jubilee House at 197-213 Oxford Street for around £165m, in a deal that reflects a yield of around 4.4%.

Property Week can also reveal he bought 215-219 Oxford Street next door for £55.1m in October, reflecting a yield of around 4%. The two buildings were brought to the market together by Irish investor Cosgrave Property Group in March 2010 for between £200m and £210m. But in October the decision was taken to sell them separately.

[papag]

Well things here are hotting up here in Spain the Banks seem to be really pushing repossessions now, alone this week I have seen Cam bank or their appointed reps smash into 3 apartments turfing out the occupants dumping furniture in corridors and scrawling Cam Bank in red ink on the doors with changed locks .

[leicestersq]

Well things here are hotting up here in Spain the Banks seem to be really pushing repossessions now, alone this week I have seen Cam bank or their appointed reps smash into 3 apartments turfing out the occupants dumping furniture in corridors and scrawling Cam Bank in red ink on the doors with changed locks .

Why doesnt Spain have SMI? Dont they know another Great British invention when they see one?

[mattyfc]

Will be interesting to see how the population takes the announcement of new cuts if and when it happens. With the protests could be pretty ugly.

Also how the population takes this seemingly much harder line you are seeing from the Banks. How much pressure will the mortgage debt for life law come under?

Can’t see a good conclusion to the Spanish story. May take months or years, unless the crisis is managed to a degree that seems to have escaped politicians so far thing could get messy.

[skomer]

Will be interesting to see how the population takes the announcement of new cuts if and when it happens. With the protests could be pretty ugly.

Also how the population takes this seemingly much harder line you are seeing from the Banks. How much pressure will the mortgage debt for life law come under?

Can’t see a good conclusion to the Spanish story. May take months or years, unless the crisis is managed to a degree that seems to have escaped politicians so far thing could get messy.

They can all go to Germany, plenty of jobs there

[Bloo Loo]

Ah - so if the figures are bad, we believe them 100% without taking into account Jan/Feb and March (if Easter's late) are traditionally poor months. And when there's an improvement, suddenly it's government propaganda. Get a grip old son, the figures are far too high, but luckily they'll continue to decline in the next few months - assuming the tourist figures are genuine and not made up. This may be seasonal factors, but at least it's good news for those who get work

the figures may be inproving, as they should after a bust, but unlike a normal bust, the debt has not been defaulted...its there waiting to pounce on the seedling new business as soon as cash arrives.

[winkie]

Went there not so long ago, although unemployment is high (particularly for the young) but so is morale, people still had money but were more careful how they spent it....very close-knit family/social communities that stick together and help each other, many businesses are old family businesses, very rarely do you come across global known brand named shops or products in the area I visited....in fact the area could be said to be totally self sufficient if it had to be.....the councils must have money to spend, lots of the roads were improved all newly tarmacked, the town square was having new slate block paving put down.....newly built lookout view points, trees being planted, new street lights......the place looked like it had a new lease of life, very smart.

[Bloo Loo]

Went there not so long ago, although unemployment is high (particularly for the young) but so is morale, people still had money but were more careful how they spent it....very close-knit family/social communities that stick together and help each other, many businesses are old family businesses, very rarely do you come across global known brand named shops or products in the area I visited....in fact the area could be said to be totally self sufficient if it had to be.....the councils must have money to spend, lots of the roads were improved all newly tarmacked, the town square was having new slate block paving put down.....newly built lookout view points, trees being planted, new street lights......the place looked like it had a new lease of life, very smart.

all those public works are your Euro Stimulus Funds at work.

[winkie]

all those public works are your Euro Stimulus Funds at work.

Don't know where the money came from, but a least it is better spent improving the living conditions of the community that live there than going to pay fat cats big salary and future very big index-linked pensions.