Bank of Spain sees recession moving faster on “increased risk aversion”
Private consumption falling at fastest rate for over a decade
Far from letting up, Spain’s recession is picking up speed in the second quarter, according to the latest figures released by the Bank of Spain. “The latest information points to a continued reduction in activity at a more intense pace,” says the central bank’s June bulletin.
Lower consumption and persistent job destruction are causing an even greater decline in GDP between April and June than the 0.3-percent contraction recorded in the first three months of the year as compared with the last quarter of 2011. The results from the first quarter of this year confirmed that Spain had officially entered recession for the second time in three years.
Experts at the institution now presided by Luis María Linde based their warning on retail sales, consumer confidence and private consumption, which shrank in April at a pace not seen since 2003. Vehicle registration also fell faster in May compared with the same month last year, to 15.3 percent.
Meanwhile, on the supply side, investment continued to show signs of weakness, according to the report. Industrial output shrank at a rate of 13 percent in April, almost four points higher than over the same period last year.
As for the labor market, it continued to walk down the path of greater job destruction that began in the second half of 2011. The bulletin set the current unemployment rate at 24 percent, roughly in line with the National Statistics Office’s (INE) Active Population Survey. The Bank of Spain states that this overall deterioration of the economy runs parallel to “a notable increase in aversion to risk and high market volatility” due to a new outbreak of the debt crisis.
Because of the worsening situation in neighboring countries, real exports fell 0.5 percent year-on-year in April, a similar figure to the first quarter.
In any case, it is not until June 30 that the INE will provide the first official advance of second-quarter GDP figures; before that, the Spanish central bank will also put forward its own preliminary figure
The intensification of the recession, which is taking place at a faster pace than expected, is confounding all previous forecasts. Regardless, the government continues to hope that the economy will shrink by no more than 0.3 percent in the second quarter. This number was established by Economy Minister Luis de Guindos in early April, and it is already beginning to sound outdated. Most private analysts feel that the second quarter of 2012 will, in fact, represent the apex of the current recession.
According to a Savings Banks Foundation analysis that synthesizes 18 other reports, Spanish GDP will intensify its pace of decline until it reaches a quarterly rate of 0.9 percent, a figure to rival the lowest moments of the 2009 slump.
Despite this crescendo in the economic crisis, experts believe that 2012 will end with a GDP decline of 1.7 percent, in line with the government’s own figures, because the first quarter was better than expected. There are differences with respect to 2013, however. The latest average forecast for next year posited by private analysis services talks about 0.6 percent, eight tenths of a point lower than the previous figure. Yet the government trusts in a recovery of 0.2 percent even though the macroeconomic conditions it supervised for the recent stress tests on the banks admitted a likely contraction of 0.3 percent.