Personal consumption is Spain and the US has begun to slow down at a delicate moment in view of the demanding valuations in the credit market after January’s rally. In this context, and after a new warning from the UK flash PMIs, the second one came on Thursday. The country that accounted for most of the growth in employment in the EU during 1H22, Spain, saw its unemployment rate rise in Q4 (12.87%, 12.67%p) according to the EPA report. And even though Q4 is usually weak, this past quarter has seen the biggest drop in employment since 2013. Moreover, this is the second consecutive increase in unemployment, something that has not occurred since 2018.
For our economists, this loss of traction in job creation calls into question the future evolution of private consumption. All in an environment where corporate margins are still in the eye of the storm in both Europe and the US (Intel’s profit warning yesterday is a good example – see below). The third risk is the US economy. Q4 GDP, having beaten expectations (2.9% year-on-year, 2.6%e, 3.2%p) and pointing to the Fed’s desired soft landing, also reflects a worrying picture.
And that is that 1.5pp of growth is explained by the volatile inventory component. And much more importantly, personal consumption growth is starting to moderate notably. As our economists explain, consumers are no longer in the mood to buy durable goods, where growth of 0.5% year-on-year is on top of the -0.8% slump in Q3. And therefore, the picture is fixed by the growth of non-durable goods, +1.5% (-0.1%p). All in all, with consumption slowing down, also visible in the recent December retail sales, and inventories at three times 3Q levels, the poor 4Q investment levels are not likely to recover in the short term, according to our economists.