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Economy in Brief

Spain’s Recovery Is Short Cut
by Robert Brusca   December 07, 2010

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
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