• El Corte Ingles readies 1 billion euros to lend to customers
  • Shoppers to spend 10% more as rates on personal loans drop

Unemployment is falling, the economy is growing, credit is flowing and Spaniards are planning a little more festive cheer this year.

Each household in Spain intends to spend 684 euros ($725) this Christmas, 10 percent more than last year, according to a survey by Deloitte LLP. Banks and retailers are offering more money at lower interest rates as the country’s economic recovery boosts consumer confidence to record levels, spurring demand for credit in the most lucrative corner of the Spanish loan market.

“I will spend more than what I did last year, especially on presents,” Jesus Ramos, a 23-year-old marketing studies graduate, said in an interview in central Madrid as he made his way to the offices of a motoring magazine where he’s worked for the past six weeks. “My situation is indeed better, hence I plan to spend more.”

Spain has turned the corner in 2015. Prime Minister Mariano Rajoy, who will fight for re-election this month, is predicting the economy will grow 3.3 percent this year, faster than any other of the euro region’s largest countries. While still 21 percent, the unemployment rate is the lowest since 2011. Borrowing costs meanwhile have tumbled.

Declining Rates

The yield on 10-year Spanish bonds is back down toward this year’s lows at 1.63 percent after rising in November on concern the election may be inconclusive.

The average interest rate that banks charge on new consumer finance loans for up to one year stood at 4.51 percent as of September compared with 5.77 percent a year earlier and 7.29 percent in 2012, according to data from the Bank of Spain. New loans to finance consumer purchases rose 15 percent from a year ago, the central bank said. 

The expectation is that it will all add up to a bumper Christmas. Household spending on consumer goods remained “highly dynamic” at the end of the third quarter and start of the fourth, the Bank of Spain said.

Hiring, Lending

Retailers and banks, whose shares sank last week because of concern about their exposure to losses at renewable energy company Abengoa SA, are getting ready.

The period from November to January will generate 850,000 contracts for seasonal work, 16 percent more than a year ago, according to Adecco SA, the world’s largest provider of temporary staff.

Spain’s biggest retailer, El Corte Ingles, said on Nov. 5 it would offer 1 billion euros of loans for 700,000 customers who use its credit cards at its 87 department stores. The average annual interest rate is as much as 10.12 percent, according to the company’s website. Its finance arm is owned by Banco Santander SA, Spain’s biggest bank.

A smaller lender, Banco de Sabadell SA, reduced the interest on its consumer finance loans from 10 percent to 9 percent this Christmas as it sets a goal of granting 500 million euros in credit for the holiday season. 

“Consumer finance is usually the type of credit that gets hit before when a country goes into recession,” said Nuria Alvarez, a banking analyst at Renta 4 in Madrid. “But it’s also the one that recovers first and that is what we are seeing in Spain.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE