The index has only risen in one month (February, just before the elections) in the last 15.
All the sub components were also down. A year ago the indicator stood at 92.5, but since then Spain's economy has slipped into a sharp slowdown as the global credit crunch exacerbated the gradually developing grand finale to the country's decade long property bubble.
To help us understand how all this works, and what such a reading might imply, PNB Paribas have kindly prepared a nice chart which overlays consumer confidence (with a 3 month lag) over consumer spending. If this chart continues to give a reasonable representation, then we may expect consumer spending in October to be dropping in much the same way as consumer confidence has just fallen in July.
Spanish consumers may find yet another reason to get pessimistic in a survey of European housing published by ratings agency Standard and Poor's last Wednesday. According to S&P's estimates UK house prices are set to fall by a quarter in total but could find a floor next spring, unlike in Spain, which is set for a longer housing correction.
S&P said the average cost of a house would revert to about 4.4 times average annual earnings - near back to where it was in 2000 - if prices fell by 25 percent overall. S&P said such a drop implied another 17 percent fall for UK house prices, with a trough occurring in April or May 2009, given the market's current rate of decline. The market is down by almost 10 percent since August 2007.
Spain was also likely to see 25 percent peak-to-trough drop in house prices, according to S&P's, but a cocktail of higher interest rates, excess housing supply, and a darker economic climate meant it would take longer to get there, S&P's said.
Standard & Poor’s, also estimated that there are 1 million homes currently looking for a buyer, 500,000 of them newly built. One developer’s association recently forecast as many as 750,000 newly built homes on the market by the end of 2008.
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