Bank of Spain forecasts

The Bank of Spain forecasts that the Spanish economy will embark on a gradual path of deceleration until 2022, and therefore maintains its 2% and 1.7% annual growth forecasts for 2019 and 2020, respectively. GDP growth rests on the back of positive evolution of domestic demand owing to the healthy wealth situation of households and companies, and a monetary policy that is accommodative. In contrast, the external sector loses dynamism as growth in exports is less than imports in an environment rife with global uncertainty.

As for job creation, it slows its pace to 2% and 1.3% annually in 2019 and 2020, respectively. This evolution puts the unemployment rate of 2019 (14.3%) on par with 2018 (14.4%).

Whereas, public deficit has been revised upwards compared with September, to the tune of 2.5% of GDP in 2019 (+0.1pp) and 2.1% in 2020 (+0.3pp), mainly due to the increase in public expenditure stemming from the CPI-linked pension indexation and the rise in civil servants’ salaries, together with the lower than expected revenue collection.


Public debt, Spain

In October, the Public Administration debt increased by 2.7% year-on-year, amounting to €1.2 trillion and 96.8% debt-to-GDP ratio. By Administration levels, the indebtedness presents the following evolution:

• General State Administration → 2.5% year-on-year increase, amounting to €1.08 trillion.

• Social Security → 54% increase, to a total of €53.7 billion.

• Autonomous Communities → 2.2% year-onyear increase, amounting to €298.9 billion.

• Local Administrations → 5.2% decrease, to a total of €25.5 billion.


Real estate sector, Spain

Since the beginning of 2019, the activity of the real estate sector has decreased due to the worsening economic prospects. Specifically:

• Between January and October, home sale dropped by 3.1% year-on-year, compared to the 12% increase in the same period of 2018.

• In Q3 2019, new hires in the construction industry reduced to 2.4%, which is 5.7pp lower than the average growth experienced over the previous two quarters (8.1%).

• Between January and September, new construction permits dwindled to 5.2%, compared to an increase of 9% in the same period of 2018.

• In Q3 2019, housing price increased by 3.1% year-on-year, down from the 3.8% average in Q1 and Q2 2019


Labour cost, Eurozone

In the first three quarters of 2019, the labour cost per hour worked increased in the Eurozone at an average annual rate of 2.7%, compared with 2.3% in the same period of 2018. By components, wage costs rose by 2.8% year-on-year and non-salary by 2.5%.

As for Spain, the increase in labour costs per hour continued to converge towards the Eurozone average, even surpassing it in this latest analysed period with an average annual growth rate of 2.8% year-on-year. The increase in non-salary costs (3.9%) is considerable when compared with the rise in wages of 2.5%.


Growth forecasts, Germany

The central bank of Germany (Bundesbank) has lowered its GDP growth forecasts to 0.5% per year in 2019 and 0.6% in 2020, compared with the previously forecasted in
June of 0.6% and 1.2%, respectively.

This downward revision is due to the weak German manufacturing sector, which has deteriorated the most in the Eurozone, as a result of severe influence from the US-China trade tensions, and the looming uncertainty associated with UK’s exit from the EU. Specifically, between January and October, the German industrial production dropped by an average of 4.6% year-on-year, compared with the 0.2% increase reported by all the other Eurozone economies.


Industrial production, China

In November, China’s industrial production recovered to 6.2% year-on-year, which is 0.6pp higher than the average recorded between January and October 2019, and well above the 5% year-on-year growth forecasted by analysts.

This evolution is mainly explained by the substantial increase in the industrial production of private companies (8.9% year-on-year), as in state-owned companies, it increased by a mere 3.7%.

By type of industry, the greatest progress was made in Energy and utilities [electricity, heating, gas and water] (6.7%), followed closely by Manufacturing (6.3%) and Mining (5.7%).


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