Spain Economy Continues to Deteriorate

In the first quarter of 2013, the Spanish economy contracted 2.0 percent yoy and 0.6 percent qoq, deepening its second recession since the collapse of the housing sector. Indeed, tough austerity measures in the form of spending cuts and tax hikes continue to hamper the job market and deteriorate domestic demand.
Nuno Fontes | 5/29/2013 9:16:26 AM

In fact, in Q1 of 2013, the unemployment rate reached an unprecedented high of 27 percent and youth unemployment hit 57 percent. More importantly, consumer confidence is near historic lows and consumer spending reached its lowest level in eight years. As such, retail trade has been contracting for 21 consecutive months and fell 10.9 percent yoy in March. Furthermore, the overall weakness of the economy is taking its toll on the industry sector as production contracted for the 18th month in a row, in March. On the positive side, the European Commission agreed with the Spanish Government to ease its deficit reduction targets up to 2016 in a bid to focus more on structural reforms rather than on blind budget goals.

Consumer spending has been in a downward trend since 2008 and was reported at its lowest level in 8 years in Q4 of 2012. As such, retail sales decreased for the 22nd month in a row, in April.

In Q1 of 2013, the unemployment rated reached an all-time high of 27 percent. Youth unemployment was reported at 57 percent.