Spain Tourism Boost Fizzles Amid Recession: Economy
Spanish registered unemployment in May fell less than a year earlier as a deepening recession in the euro area’s fourth-largest economy damped hiring in the run up to the country’s peak tourism season.
The number of people registering for unemployment benefits fell by 30,113 from April to 4.71 million, less than half the 79,701 drop in the same month last year, data released by the Labor Ministry in Madrid showed. The figure is the worst for a month of May since the start of the crisis in 2008.
Tourism is the biggest contributor to the country’s economy, and any slowdown in hiring, at a time when unemployment already tops 24 percent, will make it more difficult for the government to meet its pledge to slash its deficit by more than half this year. Growing investor concern about Spain’s public finances and the need to shore up the banking system has fueled speculation the country will be the next to need a bailout.
“Even seasonal hiring is becoming difficult for cash-strapped Spanish companies,” said Thibault Mercier, an economist at BNP Paribas in Paris. The data adds to signs of weakening activity in the euro zone after average unemployment in the 17 countries last week reached 11 percent in April, he said.
U.S. index futures and European stocks retreated with the Stoxx Europe 600 Index down 0.3 percent to 234.45 at 12:15 p.m. in London. The benchmark measure has declined almost 14 percent from its 2012 high on March 16 amid growing concern that Greece will be forced to leave the euro currency union. Standard & Poor’s 500 Index futures expiring in June lost 0.6 percent.
Prime Minister Mariano Rajoy’s government today repeated it isn’t under pressure from European allies to seek a bailout to recapitalize banks. The mounting cost of provisions against bad real estate loans and other credits has prompted Spanish debt to fall as investors doubt Rajoy can tackle a budget deficit similar to that of Greece.
Spain’s 10-year bond yield reached a six-month high on 6.7 percent on May 30. The yield fell 4 basis points today to 6.49 percent at 11:10 p.m. London-time after the Wall Street Journal reported Germany may be willing to lift its objections to common euro-zone bonds or mutual support for European banks. Newspaper El Pais also reported the country is negotiating EU aid for its banking system that wouldn’t be considered a bailout.
A spokeswoman for the Prime Minister’s office who denied to be identified in line with government policy said in a telephone interview she had no knowledge of such talks and repeated that Spain is under no pressure from European partners to seek a bailout.
Spain slipped into its second recession since 2009 in the first quarter and the economy is set to contract further in the three months through June even as the surplus of the nation’s balance of tourism and travel services increased in the first three months of the year, according to the Bank of Spain.
The fallout from Europe’s debt crisis is weighing on the economic outlook, the Germany-based Sentix research institute said today. European investor confidence dropped to the lowest level in more than three years in June.
In Asia, there are also signs that the economic growth is easing. Non-manufacturing industries in China expanded at the slowest pace in more than a year, as export orders declined and weakness in real estate countered strength in retailing and leasing, an official survey indicated yesterday.
The report adds to evidence that the world’s second-biggest economy is weakening as Europe’s debt crisis crimps demand and government curbs on the property market feed through to more industries. JPMorgan Chase & Co. has cut its full-year economic growth forecast for China twice in a month and now estimates an expansion of 7.7 percent, down from 9.2 percent in 2011.
Asian stocks dropped after the services data and a U.S. payrolls report that showed fewer jobs added to the American economy than forecast. Japan’s Topix fell below the lowest level seen during the 2008-2009 financial crisis and headed for its weakest close since December 1983. The MSCI Asia Pacific Index slid 2.3 percent at 8:15 a.m. in London.
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