Spain Retail Sales May 2008

Well the horror story just gets worse and worse, doesn't it? This time it is retail sales that are out there trying to test the bottom. Retail sales in Spain fell 5.3 percent in May from a year earlier (price corrected), led by a 12.2 percent drop in purchases of household goods, the Instituto Nacional de Estadistica INE said yesterday in Madrid.



According to economists surveyed by Bloomberg, the Spanish economy faces a 45 percent probability of shrinking for two straight quarters before the end of 2009, up from 30percent last month. I don't know why people imagine we are going to have to wait till 2009 for this. I would say - looking at the retail sales and industrial output numbers - there must be a 50% possibility that Q2 2008 will show a q-o-q contraction, and its hard to find reasons to suggest why we should start expanding again in the next quarter, although we may well get some "bounce" in Q3 if the rate of contraction slows in some areas (it depends). In which case a good pair of candidates for straight q-o-q contraction might be Q4 2008 and Q1 2009. Of course both of these are before the end of 2009, so the economists saying this would be proved right in a very loose sense of the term.