At the end of each January and the beginning of each February, official sources always release a slew of economic data.
This week, Shaun Richards, a leading independent economist who studied at the prestigious London School of Economics, before being headhunted by major firms and public institutions to offer analysis on economic trends, shares his insights with SUR in English on the various figures that have recently been published in Spain.
What, in your opinion, will be the key economic themes in Spain in 2013?
In late January 2012, I wrote an article suggesting that an economic depression was more of a danger for Spain than an economic recession. Since then, the subsequent data has backed up that view, as not only did 2012 disappoint and show an annualised contraction of 1.8 per cent, but growth for 2011 was revised down. A key variable which helps in measuring this is employment, which fell by 363,300 in the last quarter of 2012 alone, because in the ‘credit crunch’ era changes in employment have been a good guide to what is likely to happen next.
Does the recent retail sales data tell us austerity isn’t working?
The latest retail sales numbers, with their 10.2 per cent decline on the year before in volume terms, tell us that domestic demand has fallen and the danger is a downward spiral. By reducing domestic demand we see likely lower tax revenue and higher social spending, which means austerity measures can be a type of ‘economic self-harming.’
What does the recent mortgage interest rate rise indicate and did the data surprise you?
It indicates that expansionary policy by central banks often gets ‘stuck’ in the banking sector and does not reach the borrower or consumer. Whilst the banks get cheaper money they pass it on much more rarely than they get it. Although I often highlight this, I confess, even for me, this particular rise did surprise.
How do you feel the strengthening euro might affect Spain?
This must be dampening the prospects for Spanish exports which, up until now, have been a success story, so a bright spot looks likely to be dimmed and maybe turned off. Previously, Spanish exports had been supported by a falling exchange rate.
Are Spain’s recent GDP figures an accurate snapshot of the current economic situation?
One can debate how useful GDP data actually is particularly in a country with such a large ‘black economy’, as Spain is suspected to have. However, if we take the numbers at face value I think that they have understated the position, and the reality is worse than they might have you believe.
Is there any good economic news?
There are many factors which could yet change, as for example the oil price which has been rising could fall. Or the European Central Bank could take action to cut interest rates or loosen monetary policy in response to the higher exchange rate. But the best news of all would be for the government to face up to the problems rather than ignoring them.