According to Eurostat in both the euro area (EA16) and the EU27, the seasonally adjusted household saving rate continued to increase and the household investment rate to decrease n the second quarter of 2009. In both regions the fall in business investment rates and profit shares continued, though at a lower rate. In the second quarter of 2009, the seasonally adjusted gross saving rate of households was 14.4% in the EU27 compared with 13.5% in the first quarter of 2009. In the euro area, the household saving rate was 16.5% in the second quarter of 2009, compared with 16.0% in the previous quarter. In both cases these were the highest rates recorded since the start of the time series in the first quarter of 1999.
Can't you see it now? Maybe you need to squint harder, let's try this - in the EU27 the gross investment rate of non-financial corporations was 20.8% in the second quarter of 2009, compared with 21.4% in the first quarter of 2009. In the euro area, the investment rate was also 20.8% in the second quarter of 2009, compared with 21.4% in the previous quarter. In both cases (again) these were the lowest rates recorded since the start of the series in the first quarter of 1999.
Still not got it? Savings up and investment down - where's the demand coming from? Ah, yes, government stimulus. Oh well, hard luck this year, let's try again in 2010. Or maybe someone, somewhere will finally get it: the name of the game is now (extra community) exports, and the value of the euro is going to matter.
Plan E and other stimulation packages like big discounts for buying a new car is undoubtedly having a major impact on the economy. When I walk round my town, Castellón de la Plana, I'm absolutely staggered by the amount of public works going on. Not only the improvised Plan E projects but also central govermnent financed major roadworks and many new public buildings going up financed by the Generalitat. Many of Plan E projects look entirely superficial while some have been badly executed and now have to be redone. The ayuntamientos around Spain have created 325,000 direct jobs. To this figure you would need to add all those jobs being generated by project work outside Plan E. I've also heard that these projects are helping their material suppliers survive and in many cases are the only domestic customers still placing orders with companies. So the total number of jobs being generated or saved and the boost to domestic demand is highly significant.
ReplyDeleteWell I'm sure you know where I'm getting to. In spite of all this, there's talk of a six figure increase in unemployment when the October figures are announced next week. We'll see, but what would the real unemployment be in Spain without the stimulation program, which will inevitably grind to a halt as this level of public funding is totally unsustainable for much longer?
The more I think about it, the more I go along with your ideas Edward that this is another bubble that's going to burst quite soon. Well more like a big nuclear explosion than a bubble.
Great website which I've just discovered. Confirms all and more that I think and know about Spain (I am an anglo-spaniard with over 25 years of living and working in Spain). The country is a disaster and is going down the tubes - the only thing holding it together is the EU otherwise a civil war would not be beyond the realms of possibility knowing their character and immaturity in all things political, economic and social.
ReplyDeleteI have written several articles about banking system, corruption and spanish character and culture which you can see at:
http://www.eyeonspain.com/authors/robert-tenison-(deadly-sectrets)-216.aspx
and
http://www.eyeonspain.com/spain-magazine/spain-most-corrupt-country.aspx