Spaniards Raise Toast to Recovery by Heading Back Out to Bars

  • Spanish economy expanded more than expected in second quarter
  • Consumption by families is helping to drive recovery

Now that the hangover of financial crisis has faded, Spaniards are heading back to the bar.

That’s a relief for the country’s battered food and drink industry, which saw 25,000 establishments close between 2008 and 2014 as consumers cut back during a slump that drove the unemployment rate above 27 percent. In 2015, more bars opened than closed for the first time in seven years as the economic recovery made it easier for Spaniards to indulge their love of wine, coffee and conversation while feasting on tapas.

“We have customers who come in for breakfast and dinner and people who work nearby coming in for the lunch menu,” said Yolanda Millan, 44, who opened a bar in Montecarmelo, a new middle-class district on the outskirts of Madrid. “People also like soccer on the weekends.”

Even so, Spain’s failure to form a new government after two elections in the past eight months is a threat to the economy -- as well as a favorite topic of bar-room chatter.

While unemployment has fallen from its post-crisis peak, it’s still at 20 percent. Further progress will depend on efforts to build a political consensus that will improve companies’ confidence and enable job creation to continue. Acting Prime Minister Mariano Rajoy is still short of the backing he needs to form a government and avoid a third round of general elections as he faces a confidence vote in parliament next week.

Bar Culture

“Consumption has been one of the main growth drivers and this will be the case during the second half of the year,” said Yvan Mamalet, senior euro-area economist at Societe Generale SA in London. “Political uncertainty will weigh on business investment and hiring decisions.”

In a symbol of the country’s convivial way of life, Spain has about 260,000 bars, or one for every 175 of its inhabitants -- more than any country in the world, according to a study by Nielsen, a firm that tracks consumer behavior. By comparison, the U.K. has one bar per 500 people and France one per 350.

“In Spain, one of the best ways to get the pulse of the nation is going to the bar -- it’s part of the country’s DNA,” said Asis Gonzalez de Castejon, director for retail analytics for Nielsen in Madrid. “The economic turnaround, coupled with falling unemployment and rising confidence, means Spaniards are spending again.”

Household spending growth has averaged close to 1 percent over the past year, and rose 0.7 percent in the second quarter, when the economy grew 0.8 percent. Falling prices may also be helping households; Spain’s inflation rate hasn’t been above zero in two years.

Investment and trade also helped the economy in the three months through June. The government predicts expansion of 2.9 percent this year and 2.3 percent in 2017, extending a recovery that began in the third quarter of 2013.

It’s not just bars that want to cash in on the consumer mood. Inditex SA is working on a 5,000 square-meter Zara store in Madrid’s Azca business district, while supermarket group Mercadona, owned by Spanish billionaire Juan Roig, is opening 60 new venues this year.

Data on Friday showed continued growth in retail sales, which rose an annual 4.9 percent in July. Nielsen’s Gonzalez de Castejon forecasts that net sales at bars to jump 6 percent in 2016.

Even so, while Spain is enjoying better times economically, they’re still not as good as they were at the end of the last decade. Spaniards are spending less in bars than they were before the slump, according to Nielsen.

Rajoy’s caretaker government remains optimistic about the labor market, predicting 900,000 new jobs by the end of 2017. While most economists expect the pace of the recovery to slow as the impact of past reforms fade, they still see spending driving growth.

For new bar owners like Millan, starting a business has been a way to benefit from Spain’s economic revival. She’s now showing soccer in her venue, counting the Real Madrid on a big screen will help lure in more customers.

That’s if politicians get their act together. While the ongoing political deadlock hasn’t hit her business yet, Millan is concerned about the cost of lasting uncertainty.

“What’s scary is not knowing what’s going to happen,” she said. “I’m married, I have two children and I’m the owner of a bar. We just want to know how this ends.”

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