The Spanish economy is entering a more mature phase of the cycle and, therefore, its growth is gradually slowing down to levels that are more sustainable in the long term. In this context, CaixaBank Research wonders what trends can be expected in the main driver of the economy: private consumption. Following are their conclusions.
Francisco Vidal | The demand for credit from households continues to rise in the EMU and, in particular, consumer credit. Entries for lending of M3, once the figures have been seasonally-adjusted and the effect of certain changes in the perimeter have been factored in, showed that loans to households are growing at a rate of 3.0% annually, led by those earmarked for consumption (+ 7% annually)
FCC is an (ex) domestic construction company that moved into Environmental Services & Water management. It is not alone in embracing new business models including Sacyr, ACS and Acciona, which moved from a domestic construction business model to respectively an international concession one, an international civil engineering one and an international electricity generation one, while Royal BAM partnered with PGGM to grow in the PPP area and Bilfinger shifted to industrial services.
The Spanish economy grew at a rate of 3.2% in 2016, although signs of a slowdown are beginning to appear. Almost all the external factors which had boosted GDP growth latterly (the so-called tail winds) may disappear over this year.
Julius Baer Research | Consumer demand actually looks quite good in all markets, where the overall economic backdrop has improved, with less unemployment and rising real wages. The private consumption component of gross domestic product (GDP) varies between 60% and more than 70%, as is the case for the US, in advanced economies.
Julius Baer Research | The past years’ least loved commodity has made a silent comeback. Coal prices are up more than 30% from the earlier year lows. Northwest European coal import prices, the leading benchmark, trade above USD 55 per tonne. The comeback is in part related to the oil and natural gas price rally.
The trend in the variables observed indicates that the recovery of the Spanish economy continued during the first half of 2016. With nearly 80% of the information available for 2Q16, the MICABBVA model estimates that quarterly GDP growth (QoQ) will have completed one year at around 0.8%. If confirmed, this stabilisation in the pace of expansion would give an upward bias to the growth envisaged in BBVA-Research’s baseline scenario for 2016 (2.7%).
BoAML | Global coal prices rallied strongly since March on rising crude oil prices and Chinese production cuts. Front month coal prices in Newcastle rose by $5 to $50/mt, outpaced by a staggering $17 rise in 12-month forward prices to $58/mt. How did this happen? Higher oil prices pushed the global coal cost curve up by about $5/mt, on our estimates, explaining about 30% of the rally in coal forward prices.
There was a time, during the Spanish property boom, when Spain was capable of taking in six millions of inmigrants and build more than Germany, France Italy and UK together, in which cement consumption also beat records: more than the whole of the US. Now that public works have hit a soft –and hopefully- temporary bump it has descended.
Ana María Llopis, independent director at Societe Generale explains that “the entity’s share price was at 40 euros before the crisis and now it is around 42-44 euros. So some banks have recovered. Then there are others still at low prices for particular reasons, or because they operate in China or Brazil.”