Spain – GDP contracts in first quarter

The National Statistics Institute have released preliminary figures showing the country’s GDP contracted 0.3% during the first quarter, less than previously expected.

The contraction is the same as for the previous quarter and is 0.1% less than the decline predicted by the Bank of Spain a week earlier.

The interannual GDP variation was –0.4%, as compared with 0.3%, for the previous quarter. This was due to the negative contribution by domestic demand, partly compensated by the positive contribution of foreign demand.

Mariano Rajoy’s conservative government are struggling to convince investors that is can meet it’s deficit targets and get hold of spiralling unemployment. It predicts a contraction of 1.7% this year  and growth of 0.2% in 2013.

Economists predict that things are likely to get worse before they get better pushing unemployment to even more dramatic highs.

These are preliminary results. The complete tables and charts of the Spanish Quarterly National Accounts for the First quarter of 2012 will be published by the INE on May 17th.

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More protests over cuts in Spain

Protesters hit the streets across Spain
Protesters hit the streets across Spain

As Spain slips back into recession thousands of protesters took to the streets this weekend to oppose cuts to healthcare and education.

The government plans to cut 10 billion euros from the services as part of it’s austerity measures and to enable it to meet it’s deficit targets.

The protests took place under the slogan “Don’t play around with healthcare and education”, with protesters demanding “another way out of the crisis.”

Prime Minister Mariano Rajoy said he had “no alternative” to the cuts if Spain was going to meet it’s targets and recover from it’s economic downturn.

Cayo Lara, from the United Left party, said in Madrid that many protesters believed the government was using the financial crisis as an excuse to sell off public services to the private sector.

Last week, it was announced that Spain was officially in a recession following two months of negative growth. In the same week came the announcement that Spain’s unemployment figure had increased to 24.4% during the first quarter, the highest for 18 years, and the following day the country’s debt rating was downgraded two notches by ratings agency Standard & Poor.

It’s all bad news for Spain at the moment!

Unemployment increased in first quarter

Spanish unemployment
Unemployment now stands at 24.4%

Unemployment in Spain increased by 1.59 points during Q1 to 24.4%, the highest rate for 18 years, according to figures released today by the Institute of National Statistics (INE).

A further 365,900 people joined the unemployed in the first quarter, creating a total of 5,639,500 unemployed persons in Spain.

Worryingly, the number of households with all members being unemployed increased by 153,500 to 1,728,400.

Economically active population and activity rate

The economically active population experienced a decrease of 8,400 persons in the first quarter of 2012. The number of economically active persons stood at 23,072,800 persons. In interannual terms, the number of economically active persons increased by 10,900 persons.

The general activity rate remained at 59.94%, without variation regarding previous quarter. The female activity rate increased 43 hundredths, up to 53.35%, while the male rate decreased 44 hundredths, up to 66.86%.

The distance between the activity rates of Spaniards and foreign nationals exceeded 18 points, in favour of the latter, this circumstance being explained by the different age structures of both populations.

Employment 

The number of employed persons decreased by 374,300 persons in the first quarter of 2012, standing at 17,433,200.

The drop in employment affected men (278,300 fewer) more than women (96,000 fewer). By nationality, the number of employed foreign nationals decreased by 87,300, and that of Spaniards did so by 287,000.

By age, employment drop in all aged groups. By sex, the women aged between 45 to 49 years old registered the greatest increase in employment (12,400 more). In turn, the employed men aged between 25 to 29 decreased 70,200 and women aged in that group decreased 41,100.

The number of employed persons decreased in all sectors. Services registered 184,800 fewer employed persons, Construction 90,200, Industry 67,000 and Agriculture 32,300.

The number of self-employed workers increased 46,300, mainly, due to the increase of employers without wage-earners.

The number of wage-earners decreased by 418,000, of whom 138,400 had a permanent contract and 279,600 a temporary contract. The temporary employment rate decreased 1.2 points, up to 23.76%.

Part-time employment increased by 47,500 persons this quarter, whilst full-time employed persons decreased by 421,800. The percentage of persons working part-time increased almost six tenths, up to 14.73%.

The interannual variation of employment was –3.96%, seven tenths lower than that registered the previous quarter. Employment experienced a decrease of 718,500 persons in one year, 709,700 of whom were wage-earners and 9,900 of whom were self-employed workers.

The interannual job losses among men (531,700 fewer) were so much higher than those women (186,800).

Unemployment and unemployment rate

The increase in unemployment was 365,900 this quarter, standing at 5,639,500. In the last 12 months, the total figure of unemployed persons increased by 729,400 persons.

The unemployment rate rose 1.59 points, as compared with the fourth quarter of 2011, standing at 24.44%.

The increase in unemployment was almost the same for men and women.

The male unemployment rate increased 1.63 points, up to 24.09%, whilst the female rate increased 1.54 points, and stood at 24.86%. The composition of unemployment observed since the year 2008 remained, with relatively little distance between the male and female rates, and a greater number of unemployed men than unemployed women.

By nationality, the increase in unemployment was 298,500 more unemployed Spaniards, against 67,400 more unemployed foreign nationals. The unemployment rate for the foreign population was 36.95%, almost 15 points higher than that of persons with Spanish nationality.

Unemployment increased in all sectors. In Services, there were 147,900 more unemployed persons, in Agriculture 59,700, in Industry 49,800 and in Construction 29,500. Unemployment also increased among those persons who lost their job over a year ago (by 66,200 more), and among those seeking their first job (by 12,800).

Mobility as related to economic activity 

The percentage of employed persons who were inactive in the previous quarter is now 4.05%, seven tenths less than that recorded in the fourth quarter of 2011.

The proportion of unemployed persons who were employed three months ago decreased two points, up to 17.18%. The percentage of unemployed persons for the first quarter of 2012 who were already unemployed three months prior increased 3.29 points, up to 67.51%. The percentage of unemployed persons who were inactive three months ago decreased 1.25 points, up to 15.31%.

Households

The number of households in which all active members were unemployed experienced an increase of 153,400, as compared with the previous quarter, standing at 1,728,400. In parallel, the number of households in which all of the active members were employed decreased by 252,300, up to 8,593,700.

In an interannual comparison, the number of households in which all active persons were unemployed increased by 342,400, and the number of those in which all active members were employed decreased by 472,300.

The full press release can be downloaded from INE here: Economically Active Population Survey – First Quarter 2012

Spain’s credit rating dropped

Ratings agency Standard & Poor have cut its credit rating on Spain by two notches, downgrading it from A to BBB-plus.

The agency cited expectations that Mariano Rajoy’s governments finances will deteriorate further during 2012 due to the contracting economy and the struggling banking sector.

The agency also placed a negative outlook on the country and said the situation in Spain could deteriorate further without intervention from Europe.

“We think risks are rising to fiscal performance and flexibility, and to the sovereign debt burden, particularly in light of the increased contingent liabilities that could materialise on the government’s balance sheet,” S&P said in a statement.

This was the first downgrade since Rajoy’s Partido Popular took office in December 2011.

Spain’s economy ministry said the downgrade did not reflect the impact that planned reforms would have on reactivating the economy which fell into technical recession following two consecutive quarters of contraction.

Speaking to Reuters a spokesperson said “They haven’t taken into consideration the reforms put forward by the Spanish government, which will have a strong impact on Spain’s economic situation.”

The government have already announced 50 billion euros of cuts and reforms, including efforts to support the many banks drowning under bad property loans.

S&P called on euro zone countries to better manage the debt crisis adding that the Spanish outlook could get worse without strong measures being introduced at a European level.

Other ratings agencies also have Spain marked with a negative outlook. Moody’s Investors Service rates Spain as A3 while Fitch Ratings rates the country as A.

MacAnthony in court to answer charges

Darragh MacAnthony appeard in court today
Darragh MacAnthony

Darragh MacAnthony, 36, has appeared in court in Marbella to explain what happened to money paid by customers of his overseas property company, MRI, for furniture packs that were never delivered.

MacAnthony is accused of accepting payments from MRI customers for furniture packages which the claimants say they didn’t receive.

Speaking in court yesterday the football chairman claimed the money was paid to furniture companies in Bulgaria and Turkey and that they are the ones who have failed to deliver. He added that he had paid money back to some clients out of his own pocket.

When asked about the company he claimed that MRI was legally wound up in 2010. However, Antonio Flores, from law firm Lawbird acting for the plaintiffs, said that Companies House shows it is still trading, and furthermore accounts for years 2009 and 2010 were submitted just one month ago, on March 29th, according to the registry.

Also in the dock, former MRI chief executive, Dominic Pickering said he was not a director of the company but was there to “sort out furniture problems” following MacAnthony’s departure from Spain in 2010. Pickering claimed he was paid up to €20,000 per month to deal with the problems which he said were “sorted in 99.9% of cases.” He also backed up MacAnthony’s claim that the money had in fact been paid to the furniture companies.

Fernando de Arespacochaga, 91, became the frontman of MRI following MacAnthony’s departure. He said he had been paid €600 per month by the MacAnthony’s to front the company. He claimed his nephew had convinced him to sign and he had done so “in good faith”. He added that he, and his company, are insolvent.

Over 40 plaintiffs are claiming over 600,000 has been paid to MRI to furnish properties they had also purchased through the company.

Darragh left court refusing to comment.

Spain in the news – Olympics, fraudsters and Ryanair

Last week I ran a short article covering some of the main stories from around Spain and it seemed to be quite popular so here is another! Spain is in the news because…

Spanish snub Olympics

After the useless system of allocation drew derision from most people in the UK outrage is once again on the cards as thousands of tickets went on sale after Spain admitted it could not sell its allocation.

Tickets for the opening and closing ceremonies, the men’s 100 metres and other high-demand events are now available, but to all EU residents.

Many Brits hoped that the unwanted tickets would be returned to the Olympics committee to sell on to British spectators. But the decision to make them available across the EU is likely to infuriate ticketless Britons who think they should be first in line, and believe the allocation process was unfair from the start.

Why didn’t they sell in Spain? The Spanish are a sporting nation aren’t they?

Fraudster Michael Brown in Spain for extradition

fraudster Michael Brown
Convicted fraudster Michael Brown

Convicted fraudster Michael Brown could remain in Spain for up to six months while the authorities organise his extradition hearing and any appeals presented.

“We’re not likely to see him for six to nine months if he contests the extradition,” said Nigel Richardson, a solicitor who has previously handled the extradition of a British drug suspect from Spain.

Even if the fraudster agrees to the extradition, it could still take a number of weeks to arrange.

“They’ll have an initial hearing and he will indicate if he consents to be deported or not. If yes, the authorities have 21 days to remove him,” Richardson explained.

Glasgow-born Brown, 46, posed as a bond dealer claiming connections with royalty, embezzling an estimated £36m from clients. A former chairman of Manchester United lost £8m to the criminal who lived under the name “Darren Nally” in the Dominican Republic after fleeing the UK in 2008. He was arrested in January after an international manhunt was launched. Police are still hunting for about £18m.

Ryanair to pass on charges to passengers

Ryanair
Ryanair will pass on charges

Ryanair passengers heading to Spain for the summer could be forced to pay additional charges to board their flight, even though they have already paid for their tickets.

As part of Spain’s attempts to increase revenue across the board airport landing fees are facing an increase, which Ryanair says it will not be able to absorb and must pass it on to the passengers.

The budget airline, the leading carrier between the UK and Spain, has notified customers of the possible charge, giving them the option to cancel their flights if they wish.

Although the airline is not breaking the law by passing on the charge they are not likely to be popular with travellers, especially as British Airways have announced that they will absorb the increase.

Spanish Mortgage News

IMS - International Mortgage SolutionsData issued recently confirms the situation on lending in Spain continues to be depressed.

Whilst Spanish Banks were the biggest up takers  of the European Central Banks cheap bonds issued over the last few months this money was predominately used to buy sovereign debt rather than to ease the credit squeeze.

Mortgage lending in Feb 2012 was down 9.4% from the previous month and 47.1% down from the same time the previous year.

Interest rates were up by 17.3% at an average granted rate of 4.54%.

All Banks plan to contract their lending books this year as they struggle to meet new balance sheet and provisioning stipulations introduced by the government.

IMS an independent broker based in Spain says unlike the national data our completions for the year on year February 2011 versus 2012 are up 28%.

Average granted rates were just over 4%.

It is still possible to obtain rates from 3.29% at the lower end subject to loan to values levels and linked products taken.

Heather from IMS said “The Spanish Banks do remain cautious but with the right support, this does not always impact on lending volumes.”

International Mortgage Solutions
www.international-mortgages.org

Average mortgage down 12.5% in February

INEFigures released by the National Statistics Institute (INE) show a drop in the average value of mortgages in Spain in February with a decrease of 12.5%, compared to the same period in 2011.

However, there was an increase of 4.8% in the number of existing mortgages that changed conditions, while the number of cancelled mortgages decreased 12.7%.

During the month of February, the average amount of mortgage constitutions recorded in the land registries stood at 112,179 euros, a figure 12.5% lower than the same month the previous year and 8.8% lower than that recorded in January 2012.

In the case of mortgages constituted for dwellings, the average amount was 104,868 euros, 14.6% less than in February 2011, and 2.2% less than that registered in January 2012.

The value of the mortgages constituted on urban properties was 4,615 million euros in February, indicating an interannual decrease of 50.1%. In dwellings, the capital loaned exceeded 2,770 million euros, 54.8% less.

Mortgages by institution  

Banks were the institutions that granted the largest number of mortgage loans in February (66.0% of the total), followed by Savings Banks (16.7%) and Other financial institutions (17.3%).

Regarding the capital loaned, Banks granted 66.3% of the total, Savings Banks 17.5%, and other financial institutions 16.2%.

Mortgage interest rates

The average interest rate in February 2012 was 4.35%, indicating a 17.3% increase in the interannual rate, and a decrease of 1.6% as compared with January 2012.

By institution, the average interest rate of Savings Bank mortgage loans was 4.23%, and the average term was 23 years. Regarding Banks, the average interest rate for mortgage loans was 4.54%, and the average term was 21 years.

94.2% of the mortgages constituted in February used a variable interest rate, as opposed to the 5.8% that used a fixed rate. Within the variables, the Euribor was the reference interest rate most used in constituting mortgages, specifically in 86.5% of new contracts.

Mortgages with registration changes

In February, the total number of mortgages with changes in their conditions recorded in the land registries stood at 32,588, with an interannual increase of 4.8%. For housing, the number of mortgages with modified conditions decreased 6.9%.

Considering the type of modification of the conditions, in February 26,428 novations (or modifications produced within the same financial institution) were produced, for an interannual increase of 2.8%. The number of transactions that changed institutions (subrogations creditor) was 4,516, that is 20.8% more. In turn, 1,644 mortgages changed the holder of the mortgaged property (subrogations debtor), which implied an increase of 0.7%.

Number of mortgages with changes in interest rate conditions 

Of the 32,588 mortgages with changes in their conditions recorded in the land registries in February, 24.9% were due to changes in interest rates.

The percentage of mortgages at a fixed interest rate decreased after the change in conditions (from 9.3% to 4.1% of the total), since most of these loans were referenced to a variable interest rate. Within the interest rate structure, the Euribor was the main reference. The lowest average interest before the change was that corresponding to MRTI of Banks (4.44%) and after the change was Other Interest rates (3.72%).

After the modification of conditions, the average interest of the loans decreased 0.97 points in fixed interest rate mortgages, and decreased 0.71 points in variable interest rate mortgages.

Registered mortgage cancellations 

In February, 40,658 mortgage cancellations were registered, 12.7% less than in the same month of 2011. Mortgages cancelled on rustic properties increased 9.6%, whilst those cancelled on urban properties decreased 13.4%. Cancellations of mortgages on dwellings decreased 16.6% in the interannual rate.

Geographical distribution

The highest numbers of mortgaged properties per 100,000 inhabitants¹ was in Illes Balears (169). There is no community that presented a positive variation rate. The greatest negative variation rates was registered in La Rioja (-70.8%).

Pais Vasco registered the highest average mortgaged amount (169,482). The Autonomous Community presenting the highest positive variation rates was Cantabria (26.4%).

The Communities showing the highest number of properties with modified conditions in February per 100,000 inhabitants¹ were Comunitat Valenciana (156) and Castilla-La Mancha (132). Those having the greatest number of registered mortgage cancellations per 100,000 inhabitants¹ were La Rioja (184), and Comunitat Valenciana (156).

¹ This data was calculated from the revision of the figures of the Municipal Register for the year 2011. Only the population aged 18 to 84 years old was considered.

You can read the full press release here: Mortgage Statistics – February 2012

Hotel stays down 3.5% in March

Hotel in Spain
Hotel stays down in March

The National Statistics Institute (INE) have released figures showing that overnight stays in Spanish hotels decreased 3.5% in March, as compared with the same month in 2011.

The hotels earned an average of 33.4 euros per available room and invoiced an average of 66.9 euros per occupied room.

During the month of March, 17.4 million overnight stays were recorded in hotel establishments, indicating a 3.5% decreases as compared with the same month in 2011. This decrease in overnight stays took place for both residents, whose interannual rate stood at –3.1%, and non-residents, with an interannual variation of –3.8%.

The average stay decreased 3.0% as compared with March 2011, standing at 3.0 nights per guest.

During the first quarter of the year, overnight decreased 0.7% as compared with the same period in 2011.

In turn, the Hotel Price Index (HPI) registered a 0.3% decrease in March. Regarding the indicators on the profitability of the hotel sector, invoicing per occupied room reached an average value of 66.9 euros, and income per available room stood at 33.4 euros.

In terms of occupancy, 44.6% of the available bedplaces were filled in March, indicating a 3.8% decrease as compared with the same month the previous year. The weekend occupancy rate by bedplaces stood at 49.3%, with a decrease of 7.7%.

Overnight stays of guests resident abroad

Guests from Germany and the United Kingdom registered rates of 27.7% and 20.9%, respectively, of the total overnight stays by foreign nationals in March. The German market experienced a 4.0% interannual decrease in overnight stays, while the British market registered a 2.1% increase.

Overnight stays of guests from France, Italy and Sweden (the following countries of origin) registered interannual rates of –8.3%, –23.3% and –1.7%, respectively.

Main destinations

The main destination chosen by non-residents was Canarias. In this Autonomous Community, overnight stays by foreign nationals decreased 7.2% as compared with March 2011. It was followed by Cataluña, with an interannual rate of 5.9%, and Andalucía, with an increase of 0.9%.

Andalucía, Comunitat Valenciana and Cataluña were the main destinations of guests resident in Spain, with interannual rates for overnight stays of –4.1%, –1.6% and –5.3%, respectively.

Results by Autonomous Community, tourist area and tourist site

During the month of March, Canarias was the Autonomous Community with the highest occupancy rate by bedplaces (70.1%), followed by Illes Balears (55.2%) and Comunitat Valenciana (47.2%).

The tourist areas with the highest occupancy and overnight stay rates were located on the islands and the coasts. The south of Gran Canaria recorded the highest occupancy rate by bedplaces (75.6%), while La Gomera registered the highest weekend occupancy rate by bedplaces (75.5%). Tenerife registered more than 1.9 million overnight stays in March.

The tourist sites with the highest number of overnight stays were Madrid, Barcelona and San Bartolomé de Tirajana. Mogán reached the highest occupancy rate by bedplaces (78.2%) and Puerto de Santa Cruz the highest weekend occupancy (80.4%).

Indicators on the Profitability of the Hotel Sector

The average invoicing by hotels per occupied room (ADR) in March was 66.9 euros, indicating a decrease of 0.1 euros as compared with the same month in 2011.

In turn, income per available room (RevPAR), conditioned by the occupancy registered in the hotel establishments, reached 33.4 euros, with a decrease of 1.9 euros as compared with March 2011.

By category, the average invoicing was 144.6 euros for five-star hotels, 72.4 euros for fourstar hotels and 51.9 euros for three-star hotels. Income per available room for these same categories was 75.3, 43.4 and 28.7 euros, respectively.

You can find the full press release here: Hotel Tourism Short-Term Trends – March 2012.

Forget The Bond Auction, Spain is an Absolute Disaster

Bond auction appeared successful
Is the ECB propping up Spanish economy?

Well the financial world is awash with reports that the Spanish auctions went well. They did not. And you better believe the ECB and other Central Banks were involved in the buying.

Instead, Wall Street is using the auction (and just about every other announcement) to shred and those who sold calls in their usual options expiration games. This has been the norm for years, but the mainstream financial media continues to find “fundamental” excuses for market action that is clearly just manipulation and nothing more.

Case in point, if the Spanish auction went so well, why are Spanish Credit Default Swaps widening? Ditto for Spanish yields (the ten year is back closing in on 6%).

However, ultimately this auction means next to nothing. Spain is an absolute disaster on a level that few, if any, analysts can even grasp.

How else do you describe a country for which:

  • Total Spanish banking loans are equal to 170% of Spanish GDP.
  • Total Spanish private sector debt is near 300% of GDP.
  • Troubled loans at Spanish Banks just hit an 18-year high of over 8%.
  • Spanish Banks are drawing a record €316.3 billion from the ECB (up from €169.2 billion in February).

By the way, Spanish banks need to roll over 20% of their bonds this year too. Good luck with that. I’m sure it will all work out well. After all, the ECB and IMF have the funds to prop up Spain’s €1 trillion economy.

Oh wait, they don’t. In fact no one does. The IMF’s requests for more funds have been rejected by both the US and Canada (you really think Obama will fund a European bailout during an election year?). And the ECB has already blown up its balance sheet to the point that Germany and the ECB are growing hostile to each other (I’m sure this will work out well too).

Forget the auction and the spin being thrown about. Spain is a disaster. Its banking system is a sewer of toxic debts which the Spanish Government has attempted to fix by either merging insolvent banks together or spreading toxic garbage onto the public’s balance sheet.

This might fly in the US (or at least it has so far) where the economy is more robust and diversified than in Spain. But for a country whose housing bubble dwarfed that of the US and which is already posting unemployment of 24% (the highest in the industrialized world) and youth unemployment of 50%+, it’s a tough sell.

Oh, and Spain’s King decided to take time off from hearing about the Crisis to go elephant hunting. That should go over well with the Spanish populace, which is now facing austerity measures when the country is already in a Depression.

Just wait, once options expiration ends, we’ll be back to the fireworks. In fact, smart investors should take advantage of this ramp job to prepare for what’s coming.

By Graham Summers

Graham Summers is Chief Market Strategist for Phoenix Capital Research.

Article Source: Phoenix Capital Research