I discussed yesterday the implications of the 1% increase in Gross Domestic Product in the UK in the latest quarter of 2012. Today will see the numbers for the same quarter for the United States and for the first time in a while it is very likely that the UK will have shown a higher growth rate which in US annualised style was 4% and more if you compound it. Unfortunately for us in the UK the favourable comparison stops there as if we actually look over the past year we have not grown at all whereas the United States has.
This reminds me that in these current times even flat-lining is better than some have achieved. If we look at the Kingdom of Spain we see that her economy continues to shrink as even her central bank has forecast that her economy shrank by 0.4% in the third quarter of 2012. This means that her economy will have shrunk by 1.7% over the past year if it turns out to be true. Thus the last four quarters will have gone -0.5%,-0.3%,-0.4% and -0.4%. We have been reminded of the human cost of this only this morning.
Unemployment in Spain
This is a rather chilling report as with the help of google translate we see the following.
The unemployment rate rose 38/100 from the second quarter and stood at 25.02%.
So we see that Spain has breached the 25% barrier and if we look further we see that some 5,778,100 are now unemployed there. This has risen by 85,000 or 1.49% over the last quarter and 799,700 or 16.06% over the past year. The way this is presented may be accurate but offers little or no sympathy for the human cost.
As for the annual evolution, the rising unemployment rate (16.06%) was moderate compared to the previous quarter.
It feels as though it was almost yesterday that it was considered a big deal when Spanish unemployment rose above the 5 million mark and now,sadly, we find it pushing ever higher with no respite in sight.
If we look for a national breakdown then the unemployment rate of Spaniards at 23.32% is much lower than that for foreign workers at 34.84%
Also the curse of long-term unemployment is spreading too.
The unemployed who have lost their jobs over one year have increased by 458,800.
What about employment?
Regular readers will be aware that I feel that the level and the rate of change of employment has become an important signal in the credit crunch era. By this I do not mean that it was ever unimportant, what I mean is that it used to be a lagging indicator of events but now has become much more timely and may even have some predictive power for future events and trends. So let us take a look in that vein.
The number of employed people fell by 96,900 in the third quarter of 2012 and is now 17,320,300. The quarterly rate of employment fell by 0.56%.
Whilst this is better than the 146,800 lost in the same quarter last year it means that in the last year employment in Spain has fallen by some 835,900 or 4.6%. So at this point it is no surprise that her economy is shrinking and frankly I wonder if the recorded rate of shrinkage might accelerate as it is not clear to me that the official GDP numbers have “caught up” with this decline yet.
If we look at the detail we see that troubled times show the by now familiar pattern of an increase in self-employment. This rose by 65,100 in the last quarter and by 108,400 over the past year. So we have seen a sharp move into self-employment recently. If the UK evidence is any guide there will be some “hidden unemployment” in this move.
The number of employees has fallen by 946,200 in the last 12 months, while the self-employed have increased by 108,400.
However the pattern vis-a-vis full and part-time work is unusual for these times.
Full-time employment increased by 14,800 people this quarter, while the number of part-time employed 111,800 low. The percentage of people who works part-time decreases more than half a point to 14.37%.
Actually this is quite a reversal as over the past year full-time employment has fallen by 925,900 or 5.9% and part-time employment has risen by 90,000 or 3.8%.
Another way of looking at a situation is to compare the level of employed ( 17,320,200) with the combined total of the unemployed (5,778,100) and the inactive (15,321,900) or 21,100,000. Not only are they behind but they are slipping further behind. This is becoming something of a regular feature in the Euro area countries which are in trouble and it is quite different to the situation in the UK for example.
If we look at the employment data above we see that it continues to weaken and over the past year it has weakened substantially. Maybe there is a slowing of the rate of decline but we appear to be nowhere near a genuine turning point. If we now feed in the latest survey data from Wednesday for the Euro area we see this.
Euro zone firms continued to cut employment, adjusting capacity down in response to lower levels of demand for goods and services. The overall rate of job losses eased slightly, but remained close to the 32-month record seen in September.
Whilst that report did not specifically mention Spain it did mention that the peripheral nations were still putting in the weakest performance. So it seems very likely that employment will fall again in the last quarter of 2012.
This problem is reinforced by Spain’s rise in unemployment which will further reduce domestic demand going forwards. So if we combine the two factors we see that it looks as though grim times remain ahead.
The one hope is Spain’s black economy which as we see tax rates such as Value Added Tax rise is likely to be increasing. The problem is that our measures of the size of the official economy have quite a few weaknesses but even they are far better than our knowledge of exactly what is happening in the black or unofficial economy.
One feature of all of this is that Spain’s working age population is now shrinking. It is now 38.42 million and has fallen by 47,100 in the last quarter.
Isn’t more austerity yet to come?
Added to the current downward trajectory of Spain’s economy is the fact that she is tightening the austerity noose around its neck. It was only last month that furhter measures for cuts and higher taxes of around 1.3% of economic output were announced. So this will add to her problems and 2013 looks as grim as 2012.
In the third quarter Santander has declared profits which at 100 million Euros are quite a drop on last year’s 1.8 billion Euros. The major cause was the fact that so far this year she has provisioned for 5 billion Euros of bad property loans. This gives us plenty to muse,for example how keen will she be to lend? We already have the example of the UK where her net mortgage lending is now negative which is a far cry from the heady days of 2010 when she took half the new mortgage market and promised to expand.
I questioned at the time the way that Santander was allowed to buy so much of the UK banking sector. Please do not misunderstand me Spain as a country is one of our friends and there was nothing wrong with one of her banks buying one of ours. It is the risk factor in the size of the purchases which bothered me back then and frankly it bothers me a lot more now. It may not be a coincidence that she has raised her standard variable mortgage rate in the UK this year when interest-rates were supposed to be falling. Will we see more?
Inflation in the UK
This afternoon I will be attending the consultation on “improving” the Retail Price Index measure of inflation. You can imagine it was therefore with grim humour that I spotted this on twitter.
Another UK energy price rise hike: EDF putting up bills by average of 10.8% from December (@graemewearden)