The publication of data on the evolution of per capita income in Spain and the comparison with our OECD partners does not lead us to be optimistic regarding the evolution of productivity, which is everything in the long term, but only if Population and employment do not change. Low productivity growth can be accompanied by high economic growth if the population increases and if the country, for that level of productivity, is competitive abroad. This could be the case of Spain, although it could also be that investment in Spain is lower than in our surrounding countries, which is also the case, especially since 2018.
In fact, it is very striking that investment has still not recovered its pre-covid levels, despite the massive campaigns about how important Next Generation funds are. Normally in the analysis of the economic situation we make comments on the demand side, this leads us to conclude that if there is less consumption and less investment but the country continues exporting because it is competitive, we have the perception that everything is going well. that the country grows. This is because their comparative salaries in the industrial sector and their factor endowment advantages for tourism lead to improvements in the net export balance, which does not deteriorate because little is imported given the low vitality of consumption and investment.
In this context, the slowdown in the growth of our economic partners would be slowing down our economy through lower exports of services and goods. And really the latest GDP growth figures show a loss of dynamism in the economy. In the third quarter of the year, according to the INE’s advance estimate, Spanish GDP would have grown by 1.8% year-on-year and 0.3% quarterly, corrected for seasonal variations.
However, what we have to do as economists is to ask ourselves what we can expect from the Spanish economy over the next year, but to do so the first thing is to describe the reality of the current situation, although this time we will do it on the supply side, where, in In my opinion, the signs are not very positive.
Regarding activity, we can say that the only sector that shows some dynamism is the services sector, in fact, it is the only one that is above pre-covid levels, pointing to the recovery of GDP.
Within this sector, the evolution of commerce and hospitality has been very relevant, closely related to tourism. Apparently and according to the latest known indicators, they show a certain slowdown in their activity.
It is important to pay attention to the evolution of activity related to leisure, which shows, on the one hand, a change in consumer habits towards a greater preference for leisure in summer: concerts, for example, and which in the case of the United States In the month of July it represented a historical record of contribution to GDP. This should translate into less progress in these activities in this fourth quarter: that is, the strong increase in activity in this sector in the third quarter of the year, which explains most of the quarterly growth in GDP, may be more related with a change in temporary habits at a sociocultural level than with an increase in average activity in the year.
The other services subsector that is already above 2019 levels is soncario services, which given the improvement in margins during the year on its operations at variable interest rates – we think of mortgages – and the placement of customer deposits unpaid at 4% in the European Central Bank (ECB). It is not expected that credit or the profitability of placements in the ECB will increase, but as the stock market reflects, expectations for the coming months for the banking sector are not bad.
Regarding the rest of the sectors, during the last year they have shown very poor results, being unable to recover the activity levels prior to the pandemic. In the specific case of industry, the most recent information available points to a continuation of its sluggishness, with neither industrial production, nor exports of goods, nor the sector’s turnover showing signs of improvement.
The construction sector is facing problems, some of a structural nature, which indicate that its recovery will not occur in the coming quarters. Among the challenges facing this sector, the increase in interest rates stands out, the fastest and highest in the history of the ECB.
It is necessary to highlight that this poor performance of activity in the construction sector has occurred despite the positive expectations that were had about it, due to the important injections of European Next Generation funds destined for housing rehabilitation, seeking a improving energy efficiency.
Looking ahead to next year, although it is expected that there will be no more interest increases, these will continue to be high for some time, and given the moderation in real wages, the fall in construction activity that continues is already visible. belatedly to the reduction in sales of all types of housing and the fall in new mortgages.
Finally, it is important to analyze the evolution of the primary sector since the pandemic broke out. This was the only sector in which there was no negative impact, neither from the pandemic nor from confinement, quite the opposite, its activity accelerated noticeably, being the only one that grew. This dynamism continues until the third quarter of 2021, at which point the sector began a significant decline, which culminated in a cumulative drop to date of almost 27% of its activity, being at levels significantly lower than those recorded before. . of the pandemic. It is curious that in Europe we talk about strategic autonomy, and in Spain we do not pay special attention to what may be happening in the agricultural sector, which clearly goes beyond the drought issue.
This sharp deterioration in the sector is closely related to climate issues. However, there are other factors such as cost increases, where energy has played an important role, and the impact on fertilizers and agricultural prices of the war in Ukraine.
But why not recognize that labor costs in the countryside do not stop growing since they are closely related to the minimum professional wage, that Spain already has great agricultural productivity and that these cost increases cannot be compensated. And finally, that the fall, which is the strongest that exists in the statistics, is not in line with what is happening in Portugal, where labor costs are much lower and there is room for productivity increases. We will tell the Spanish government to ask about this at the next bilateral meeting, even though the previous Portuguese socialist prime minister, a politician with bullfighter honesty and shame, or a Portuguese forcado, is no longer there.
