Spain's Q4 GDP Figure Is Not Credible

The most obvious falsehood in Spain’s Q4 GDP figure is the data related to Survey of the Active Population. According to Roberto Centeno,

“Job creation in the private sector slumped to 31,200 people from the 182,000 recorded in the previous quarter, with supposedly similar GDP growth. If we make a comparison with Q4 2014 to eliminate the seasonality effect, 63,100 new private sector jobs were created with GDP growth of 0.7%. And because there is a very high correlation between growth and employment, Q4 2015 GDP would have needed to expand between 0.3% and 0.4% – or 1.2% and 1.6% annually – amounting to a massive slowdown.”

What is true is that in 2015 we have seen some worse data on the Active Population which doesn’t match up with the official acceleration of GDP growth in the last few months of the year.

For example, employment has followed this trend:

In absolute terms (difference in millions)
Q4 2014 17.569,1
Q1 2015 17.454,8 -125 mil
Q2 2015 17.866,5 +412 mil
Q32015 18.048,7 +184 mil
Q4 2015 18.094,2 +46 mil

A sharp slowdown in the last quarter, one which includes Christmas time.

The Active Population (those people who are actively looking for work) has decreased substantially, which indicates that people are more despondent about finding a job or getting unemployment benefit.

Active Population

In absolute terms ( difference in millions)

Q4 2014 23.026,8
Q1 2015 22.899,4 +873 mil
Q2 2015 23.015,5 +116 mil
Q3 2015 22.899,5 – 116 mil
Q4 2015 22.873,7 – 26 mil

In other words, another significant slowdown. The number of unemployed has fallen, in the same period, by about 1 million.

Unemployed

In absolute terms (difference in millions)

Q4 2014 5.457,7
Q1 2015 5.444,6 – 13 mil
Q2 2015 5.149,0 – 294 mil
Q3 20154.850,8 – 300 mil
Q4 20154.779,5 – 70 mil

If we look at the last two quarters, we see that unemployment is dropping less and less, employment is stagnating, particularly when compared with a year earlier. Above all, there is a worrying accelerated decline in the active population. Therefore there are reasons for suspecting that the GDP calculation has been made, as Centeno affirms, in an inertial manner and starting at the end. It is just not credible that with these figures on employment and activity GDP has finished the year at full peak?

The affirmation that the economy grew 0.8% in the fourth quarter of 2015 is an unnaceptable farse. To really understand the extent of this trickery, the first thing is to understand how GDP is calculated. Ángel Laborda, head of Research at the Savings Banks’ Foundation, explains that this “is the reverse of how it’s done in real accounting, which estimates all the parts first before adding them up to get the total. In this case (GDP calculation), the house is being built by starting with the roof instead of with the foundations.” The Bank of Spain forecasts growth “without real accounting records” and in function of the government’s interests. “Then with this figure, its the National Statistics Institute’s job to fit in (sometimes with a hammer) the information on the various GDP components, which is incomplete and could be improved on.” A year later, a more detailed estimate is made which is always much lower.

On the other hand, Carlos Sánchez cites two authors, F. Villaverde and Lopez Salido, who show that the political uncertainty will have negative repercussions on the economy.

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Spain’s Q4 GDP Figure Is Not Credible

About the Author

Miguel Navascués