Spain Recession Eases as Exports Pave Way for Recovery
Spain’s recession eased in the second quarter as domestic demand stabilized and exports surged, supporting the government’s forecast that the fourth-largest economy in the euro area will recover this year.
Exports rose 6 percent after a 3.8 percent decline in the previous quarter, while household spending contracted 0.1 percent from the three months through March, when it shrank 0.5 percent, the Madrid-based National Statistics Institute said today. Gross domestic product fell 0.1 percent in the second quarter, the office said, confirming a July 30 estimate. The economy contracted 1.6 percent from a year earlier.
Prime Minister Mariano Rajoy is relying on exports and tourism to rekindle growth as tax increases, spending cuts and an unemployment rate of more than 26 percent undermine domestic spending. The 17-nation euro region, which includes Spain’s main trading partners, emerged from its longest-ever recession in the second quarter.
“Data seem encouraging but this could change any time,” Maria Yolanda Fernandez Jurado, associate professor in the Faculty of Economic and Business Sciences at Madrid’s Universidad Pontificia Comillas, said in a telephone interview. “Small and medium enterprises are still in a difficult situation and job creation is mostly temporary or part-time.”
Inflation (SPCPEUYY), calculated using a harmonized European Union method, slowed to 1.6 percent in August from 1.9 percent in July, INE said in a separate release. That’s in line with the 1.6 percent median of 12 estimates in a Bloomberg survey.
Growth will be flat or may reach 0.2 percent in the third and fourth quarters, Deputy Economy Minister Fernando Jimenez Latorre told reporters in Madrid today. The government maintains its forecast of a contraction of 1.3 percent for the full year, he said.
During the first seven month of the year, the number of tourist visits grew 3.9 percent from the same period in 2012, reaching 34 million. That’s more than the figure attained in July 2007, Spain’s best year for tourism since at least 2000. Tourism accounts for about 11 percent of GDP and 12 percent of jobs.
Tourism and structural reforms will help the country’s real-estate market recover, Colin Dyer, chief executive officer of Chicago-based property broker Jones Lang LaSalle Inc. (JLL) told Spanish newspaper El Pais in an interview published Aug. 11.
Unemployment declined in the second quarter after two years of uninterrupted increases and Deputy Trade Minister Jaime Garcia-Legaz Ponce predicted last week that exports will surge to a record in 2013 as the country’s competitiveness has improved. Joblessness is still the highest in the euro region after Greece.
There are signs that the “worst is over” in Spain, Marco Gadola, CEO of Swiss dental-implant manufacturer Straumann Holding AG (STMN), said last week.
Still, Spanish banks’ bad loans jumped to a record 11.6 percent of total lending in June, according to Bank of Spain data. They may peak amid continued weak economic activity at 16 percent in the second half of next year, Antonio Garcia Pascual, Barclays Plc’s chief economist for southern Europe, said last week.
The yield on Spain’s 10-year benchmark bonds fell two basis points to 4.52 percent at 1:47 p.m. in Madrid, compared with a euro-era high of 7.75 percent in July 2012, before the European Central Bank pledged to backstop the single currency. Investors demanded 15 basis points more to hold them than similar Italian securities, compared with as much as 122 basis points a year ago.
“We could see Spain trading flat to Italy or inside within six months,” said Francesco Marani, a fixed-income trader at Auriga Global Investors SV SA in Madrid. “Spain has been more effective in implementing needed reforms, tackling some problems such as regional spending and funding.”
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