Bank of Spain: Improved Q4 Indicators for Economy
January 11th, 2010
The Bank of Spain has found indicators of improved activity in the fourth quarter. They believe that consumption indicators eased their retreat in October and highlights that car registrations stepped up their advance in November.
However, the bank still believe that the data about the evolution of the activity is still “limited”, according to its latest economic bulletin.
If so, GDP could continue moderating in the fourth quarter and improve the figures recorded between July and September, reflecting a year decrease of 4%.
The Bank of Spain believes that consumption indicators eased their retreat in October and highlights that car registrations stepped up their advance in November, boosted by the effects of Plan 2000E. It notes that the most recent indicators of investment are “less negative”, while construction investment figures continue to reflect the process of “severe adjustment”.
At the same time, exports moderated their rate of decline, year on year, in October, while the pace of decline in imports continued to “fade” in the tenth month of the year.
The bank, governed by Miguel Angel Fernandez Ordonez, also noted “slower decline ‘in tourism at the beginning of the fourth quarter and that, under the Hotel Occupancy Survey (HOS) foreign overnight stays fell by 5.6% in annual terms in November, four points less than in the third quarter.
On the supply side, the Bank of Spain notes a slowing of the year decrease of indicators in the fourth quarter. In the case of industry, all indicators show it has slowed its pace of decline, as in services, where the participation rate continued to moderate its descent.
It also highlights the moderation of the fall in industrial prices in October, thanks in part to energy prices and to a lesser extent, prices of intermediate goods. Import prices, meanwhile, stressed its rate of decline to -13.8%, while exports eased its fall by nearly two points.
Financial Performance
On the financial development of the Spanish economy, the Bank of Spain notes that the latest data on the balance sheets of non-financial sectors, corresponding to October, show a “continuity” of the latest trends, because while General government funding continued to grow at” very high” rates the debt of households and companies will move into the new year as “practically nil”.
As for international financial markets, the Bank of Spain has shown that their evolution over the last month has been marked by “instability” by the uncertainty generated by the problems of debt repayment in the Dubai fund, though the appearance of favourable macro-economic data and the return of some U.S. aid have helped to support markets.
In another article in the Economic Bulletin, the Bank of Spain made an analysis on the impact of R & D in economic activity and concludes that this investment has a positive long term effect on GDP of the Spanish economy, of similar magnitude to that of other developed economies. In contrast, the short and medium term positive impact on GDP seems to be slower in Spain than in other developed countries, which would confirm the presence of “problems of technology transfer” from the research sector to goods producing sectors and final services.
It indicates that investment in public R & D seems to generate a drag effect on private R & D, but also generates a certain “expulsion effect” on the latter, due to “bottlenecks” in the research sector as a result of both the public and the private sector competing scarce resources-qualified capital. Thus, bank said that public intervention in the field of innovation can have a positive effect on economies with low levels of expenditure on R & D but, once it exceeds a certain threshold, additional increases in public spending in this matter only substitute for private spending.
Story from Barcelona Reporter
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