Global| Dec 07 2010Spain’s Recovery Is Short Cut
Summary
Spain’s economy is steadily losing ground. Industrial output made a recovery and began to show Yr/Yr increases but it is now backsliding. Real retail sales cut their recession losses and flirted with making Yr/Yr gains when [...]
Spain’s economy is steadily losing ground. Industrial output made a recovery and began to show Yr/Yr increases but it is now backsliding. Real retail sales cut their recession losses and flirted with making Yr/Yr gains when backsliding occurred.
Spain’s dealing with a collapsed property market in the wake of the financial crisis and global downturn was not bad enough. The problems in Greece shined a too-bright light on Spain’s other weaknesses. Long one of the lax fiscal policy Mediterranean countries Spain came to its time reckoning... and, it happened at the worst possible moment. Spain was forced to deal with its structural budget problems worsening its cyclical collapse. Actually Spain was in the process of climbing out of its cyclical downturn, getting a grip on the rim of recovery, when Greece’s problems led markets to stomp on Spain’s fragile grip on recovery. The German conditions for Spain to receive financial help preclude continued economic expansion.
Spain is now in a period of fiscal austerity trying to control its budget deficit in a period of severe economic contraction. That is of course worsening the contraction and in turn making the deficit worse. It is not clear what kind of progress markets will require of Spain. But with unemployment over the 20% mark it is clear that Spain’s ability to post fiscal economic miracles will be very limited.
Against that background, Spain’s industrial output rose by 0.4% in October. Output of consumer goods fell as did output of intermediate goods. Investment goods’ output alone increased. That rise helped to push the overall index higher. Still it is unreasonable given current trends to expect that Spain will be able soon to continue increases in industrial output. Spain continues to be severely challenged by economic times. This month’s rise in IP is aberrant.
| Key Spain Output and Consumption Metrics | ||||||
|---|---|---|---|---|---|---|
| Oct-10 | Sep-10 | Aug-10 | 3-Mo | 6-Mo | 12-Mo | |
| MFG IP | 0.4% | -6.3% | 6.0% | -1.0% | -5.0% | -1.8% |
| Consumer Goods | -1.3% | -6.6% | 7.0% | -5.3% | -12.0% | -1.0% |
| Durables | -2.1% | -11.8% | 5.3% | -31.7% | -16.6% | -10.8% |
| Nondurables | -1.3% | -4.3% | 5.1% | -2.9% | -9.8% | 0.2% |
| Intermediate Goods | -0.3% | -6.6% | 7.5% | 0.5% | -8.8% | -1.5% |
| Investment Goods | 1.8% | -2.9% | -0.5% | -6.7% | 1.6% | -5.1% |
| Retail Sales | Oct-10 | Sep-10 | Aug-10 | 3-Mo | 6-Mo | 12-Mo |
| Real | 1.4% | -2.4% | 1.9% | 3.6% | 2.0% | -0.5% |
| Nominal | 2.2% | -2.8% | 2.4% | 6.9% | 2.8% | 2.0% |
| Employment | Oct-10 | Sep-10 | Aug-10 | 3MoAgo | 6MoAgo | 12MoAgo |
| Unempl Rate | 20.7 | 20.7 | 20.5 | 20.4 | 19.8 | 19 |
Robert Brusca
AuthorMore in Author Profile »Robert A. Brusca is Chief Economist of Fact and Opinion Economics, a consulting firm he founded in Manhattan. He has been an economist on Wall Street for over 25 years. He has visited central banking and large institutional clients in over 30 countries in his career as an economist. Mr. Brusca was a Divisional Research Chief at the Federal Reserve Bank of NY (Chief of the International Financial markets Division), a Fed Watcher at Irving Trust and Chief Economist at Nikko Securities International. He is widely quoted and appears in various media. Mr. Brusca holds an MA and Ph.D. in economics from Michigan State University and a BA in Economics from the University of Michigan. His research pursues his strong interests in non aligned policy economics as well as international economics. FAO Economics’ research targets investors to assist them in making better investment decisions in stocks, bonds and in a variety of international assets. The company does not manage money and has no conflicts in giving economic advice.
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