Well, hello everyone. I'm supposed to be on holiday at the moment, but since economic events simply refuse to stand still (not even for me, and especially not in Russia), what else can I do. In theory I'm resting quietly in that nice looking building behind the Palamos lighthouse you can see in the photo above, and since time and Spain's developing economic crisis stand still for no man, then here I am sitting sweating it out in the local cyber cafe.
Rising Government Deficit
Spain's central government budget deficit seems to have shot up in July - reaching 9.97 billion euros ($14.75 billion) in the first seven months of 2008. The government did not provide a monthly figure for July, but the accumulated deficit for the first half of the year totalled 4.68 billion euros, so it looks like the July deficit alone as 5.29 billion euros (which presumeably has something to do with the impact on the balance of the government anti crisis measures, like the 400 euro cheques.
A sharp slowdown in economic activity, especially in the building sector, cut net non-financial revenues by 4.2 percent while net non-financial spending rose by 5.9 percent. Spain posted a record budget surplus of 2.2 percent of GDP in 2007, while the economy grew by 3.7 percent.
The Economy Ministry said on Thursday the deficit was equivalent to 0.89 percent of annual gross domestic product and that it compared with a surplus of 7.52 billion euros in the same period last year.But since the deficit was accumulated in only 7 months, then the annual rate would seem to be nearer 1.5% of GDP (up from an annual rate of only 1% of GDP in June and of course rising rapidly). At this speed, it would not be surprising if we were clocking up deficit at the annual rate of 3% by December (which means in theory no more additional measures with breaking the EU limit), and the deficit for 2008 as a whole now looks set to be more than 2% of GDP at a first guess approximation.
GDP Growth Detailed Figures Released
The INE confirmed the 0.1% q-o-q growth rate yesterday (I will try and go through the data a bit more over the weekend) and one thing stands out: investment in Spain slumped, falling by 1.7 percent from the previous quarter. Household consumption increased 0.1 percent after 0.3 percent in the previous three months and government spending propped up the expansion, increasing 1 percent after 0.7 percent.
Also, and as noted in my last post on the May balance of payments data, second quarter growth was actually supported by Spain's external account (which normally cuts into growth) and net trade added 0.3 of a percentage point (that is to say more than the total growth for the quarter, not due to improving exports, but due to falling imports. That is why you can get a strange statistical effect whereby everyone "feels" worse off since they are consuming at a slower rate, but headline GDP gets a boost from the slower consumption. (You can see the same effect in German GDP numbers earlier in the week, and in the US data today).
Basically, my view is that the positive growth registered in Q2 2008 will be the last positive q-o-q reading for the next several quarters.
Mortgage Lending Down Again
Home mortgages fell by 37.7% year on year in June, compared with a drop of 36.2% in May. A total of 43,090 homes were sold in June, compared to 61,595 in June 2007. Transactions in June were also down 6% on May. The capital value of the mortgages loaned in June was 37.1% less than in June 2007.
With stress in financial markets ongoing and unemployment rising rapidly, it is hard to find any convincing reason why the Spanish housing market should improve any time soon. In fact, the situation is likely to get a lot worse before it gets better. We have yet to see year on year falls in the official house price index and it seems only a matter of time until we do.
ECB Pressure ON Spanish Cedula Funding Continues
The debate about what to do about the creation of mortgage backed securities expressly for deposit at the ECB continues. According to Unicredit SpA Spain's banks have accumulated 89 billion euros of their own asset-backed securities, more than any euro-region country, for use with the ECB as collateral in auctions. As reported on this blog here, various influential members of the central bank governing body have been loudly indicating that the ECB is about to change the rules. Many of these securities may have been specifically created with a view to refinancing the cedulas which need to be rolled over in the autumn, but frankly I will believe it when I see it as far as any ECB action goes, since with all the rumpus they have created over their interest rate policy they would hardly want to find themselves being balmed for a major banking crisis in Spain at this point.
Large Estate Agents Slimming Down Rapidly
El Pais is reporting that the 10 largest estate agents in Spain have closed more than half their offices in the last six months. The collapse in home sales has forced 2 national chains of estate agents into administration (MC Inmobiliaria from Andalucia, and Expofincas from Catalonia). 2 others, Fincas Corral and Don Piso, have been put up for sale, though so far without any takers. At the end of last year, 9 of the 10 biggest agents in Spain had more than 100 offices around the country. Today, only 3 of them have more than 100 offices. They have gone from a combined total of 3,000 offices at the end of last year to just 1,434 today.
Are you bothered that no-one's left a comment? Does that mean no-one cares what you write? Does it matter? Are you writing for 'us' or yourself? Ho hum.
ReplyDeletep.s I'm originally from Liverpool too and I find it an incredibly romantic place. It touches my soul.
Hello there scouser,
ReplyDelete"Are you bothered that no-one's left a comment?"
No. Not at all. I enjoy feedback, but since I try to respond to most of it, I can only take so much, as it were.
"Are you writing for 'us' or yourself?"
Oh, I think that's easy: I am writing because I have to, and becuase I want to understand things better. Writing helps me understand. I think writing, generally, is one of the most egotisical activities going.
If others get some benefit, well that's an added plus.
"I'm originally from Liverpool too and I find it an incredibly romantic place."
Unfortunately I found it so "romantic" that I left at the first opportunity (to go to London to study), and the only thing I have had clear in this life was that I never wanted to go back.
Actually, I wouldn't describe the Liverpool I grew up in in the 1950s as especially romantic. Violent, xenophobic (you know, the "bullring" and "Upper-Parliament Street") and culturally backward are associations that more frequently come to mind.
And I did use to go to the cavern in the afternoons in the early 60s, chasing all those schoolgirls in their bobby-socks, only later to whirl one of them off for a ride on one of those legendary "Ferries Across the Mersey".
But I completely respect your feelings, and if Liverpool still works for you, then I am glad.
Hi Ed, I have to 'fess up, I'm a plastic scouser - I was born in the city but left when I was about 2 and grew up in Hampshire :) Maybe that's why the place feels romantic to me. I do feel like that's where I'm from and have often wondered how I'd have turned out had I grown up there. It's the maritime history that grabs me and the proximity to Ireland (also being a plastic paddy). Anyway, now I live in London and work for Lehman Brothers in Canary Wharf...
ReplyDeleteHello Again,
ReplyDelete"I was born in the city but left when I was about 2 and grew up in Hampshire :)"
OK, now I understand. And to be a bit clearer on my own account, of course I have a soft spot for the Liverpool I grew up in, even if it wasn't as romantic as the hard sell of today would suggest. I think one of the early signs of bankruptcy is when you have to "parcel off" your past, and sell it off. It seems to suggest you have little in the way of future expectations except naustalgia, and this is the part I reject.
Talking of which:
"I live in London and work for Lehman Brothers in Canary Wharf..."
I do hope they don't go bust on you. Now I understand your wary eye on Spain.
But back to Liverpool for a minute.
"It's the maritime history that grabs me and the proximity to Ireland"
This part I understand completely. Liverpool is in fact very "un-English", and apart from being what the Dubliners called the "second capital of Ireland" - as well as pop bands there was also a folk music tradition in the Liverpool I grew up in - there was always a very large Welsh community (apart, that is, from the Chinese and the Africans, and, of course, Liverpool's significant Jewish community).
One of my friends, whose father was a "die hard" protestant living in a council house, was sent to the Jewish school, but thrown out of his home, on his ears, when he started to date a catholic girl. That was the Liverpool I grew up in.
In the 1950s there were something like 15 flourishing Welsh speaking presbyterian chappels in Liverpool. Now I think there are none. All my four grandparents were migrants from Wales (2 from the english speaking south and two from the north) back in the second half of the 19th century. My poor grandma had 14 children (hence, perhaps, my interest in demography).
I think I am pretty unusual, since my parents were born at the end of the 19th century, and here I am looking out across the 21st, with biotechnology and the internet. So I span a lot of history. And yes, I am steeped in the maritime history you speak about: my mum worked as a secretary for an insurance company in the Liver Building, and my dad set sail in 1922 for an eleven year adventure as a footloose immigrant (although he did at one point build his own house) in the United States.
If ever I manage to understand how economic systems work to my own satisfaction I wouldn't mind having a crack at a biographical novel, one which starts in Liverpool in the 1880s and ends up, who knows where, in the 2020s.
OK, it's back to work time I think. But you can see blog posts serve for lots of things - including, from time to time, some very heavy duty economics. And yes, to answer your original question, I do think people are interested in - perhaps "worried about" would be more appropriate - Spain.
Take care,
Edward