global and spanish economy q2 2018 & perspectives · april 2017 value in brackets note: values...
TRANSCRIPT
Global and Spanish Economy
Q2 2018 & perspectives
May 2018
QUARTERLY REPORT
GLOBAL
GDP growth in 2017 and forecasts for 2018
Source: Círculo de Empresarios based on IMF, April 2018 3
1,8
2.3 2.9
2.0 2.3
1.3 2.0
2.3 2.4
6.9 6.6
CHINA
EUROZONE
LATIN AMERICA
MEXICO
US
BRAZIL
1.0 2.3
RUSSIA
1.5 1.7
Economic growth is achieved in all geographical areas
GLOBAL
AFRICA
2.8 3.4
Real GDP %
2018
2017
3.8 3.9
58%
42%
88%
12%
97%
3%
Source: Círculo de Empresarios based on IMF, J.P. Morgan, Markit, 2018 4
Global growth consolidatesForecasts point to synchronised growth for 2018
% countries with positive growth vs recession
2009 2012 2018
GLOBAL PMI
countries in expansion countries in recession
4%
96%
Note: The countries in recession in 2018 are Dominica, Equatorial Guinea, Nauru, Puerto Rico, South Sudan, Swaziland, and Venezuela.
53.5
April
2017
52.7
50 = Pivot
Expansion
Contraction
April
2018
Source: Círculo de Empresarios, 2018 5
Trends 2018
TRENDS
Robust global
growthSanctions on Russia
Rise in volatility
Trade
protectionism
Continued monetary policy
normalisation by the FED,
impact on emerging nations
Military tensions in
Syria
High global debt
Rising oil prices and
geopolitical instability
in Iran
Source: Círculo de Empresarios based on Caldara & Lacoviello, Policy Uncertainty, 2018 6
Geopolitical uncertainty
The escalation in geopolitical tensions at the military and economic levels is
particularly worrying
Geopolitical Risk (GPR) Index
400
300
200
100
0
50
Economic Policy Uncertainty Index
ISIS attacks
in Paris
Iraq War
9/11Gulf War
Agreement with North Korea
+ US abandoned the Iran nuclear deal
0
100
200
300
400
500
600
Jan
-85
Jul-
86
Jan
-88
Jul-
89
Jan
-91
Jul-
92
Jan
-94
Jul-
95
Jan
-97
Jul-
98
Jan
-00
Jul-
01
Jan
-03
Jul-
04
Jan
-06
Jul-
07
Jan
-09
Jul-
10
Jan
-12
Jul-
13
Jan
-15
Jul-
16
Jan
-18
Source: Círculo de Empresarios based on IMF, J.P. Morgan, 20187
Robust growth in advanced and emerging economies
Emerging*
Advanced*
Strength of Manufacturing PMI April 2018April 2017 value in brackets
Note: values above 50 indicate expectations of expansion
Forecast
Global
54.9
53.5
51.3
Real GDP growth%
(54.1)
(52.7)
(50.9)
* February 2018 value
-4
-2
0
2
4
6
8
10
Advanced Emerging Global
Emerging economies
Consumo privado
Inversión
1,21,5
3,83,2
5,1
8
The recovery in the price of raw materials contributes to a boost in economic activity
4.7
4.3 4.4
4.8
4.9
2014 2015 2016 2017 2018
Source: Círculo de Empresarios based on IMF, 2018
Real GDP growth in EmergingAnnual variation
Real GDP growth by geographical areasAnnual variation
Forecast Forecast
Note: Structural reforms in India boost its GDP growth
1.322.2
3.22.8
3.4
6.77.4
6.9 6.6
2017 2018
Latin America Middle East Sub-Saharan Africa India China
The increase in oil price puts an upward pressure on inflation rates, although
the underlying inflation remains moderate
Global inflation
Source: Círculo de Empresarios based on IMF, 2018
0
50
100
150
200
250
Raw Material Price Index2005=100
Note: The raw material index includes energy and non-energy
9
Average inflation rate
%
0
1
2
3
4
5
6
7
8
9
10
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Global Advanced Emerging
Source: Círculo de Empresarios based on IMF, Caixabank Research, Bloomberg, 201810
China: moderate slowdownThe latest indicators of economic activity are solid, although a slowdown in its economy is confirmed for 2018
2017: 6.8% 2018: 6.6%
Real GDP growth
7.2%Industrial production
Manufacturing PMI
Retail
(Jan-Feb 2018)
(March 2018)
51.5
9.7%
Year-over-Year
Year-over-Year
Year-over-Year
(Jan-Feb 2018)0
2
4
6
8
10
12
14
16
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
Crecimiento del PIB real% anual
Source: Círculo de Empresarios based on IMF & FT, 2018
11
China: growth leader in innovation and
productivity
0
2
4
6
8
10
12
China Emerging markets
excluding China
Other advanced
economies
G5
Labour productivityAnnual average growth, %
1995-2003 2004-2014
0
5
10
15
20
China Emerging markets
excluding China
Other advanced
economies
G5
Patents Annual average growth, %
1995-2003 2004-2014
G5 = US, Japan, Germany, France and United Kingdom
Other advanced economies = does not include the G5
Source: Círculo de Empresarios based on Bloomberg & IMF, 2018 12
Russia: exit from recession and sanctionsThe rise in the price of crude oil propels Russia's exit from recession, in a scenario in which the Syrian conflict and US sanctions increase its uncertainty
Russian stock exchange in $ (RTS) and exchange rate
RTS USD/RUBSanctions
GDP, inflation and current account of Russia
Forecast
55
56
57
58
59
60
61
62
63
64
1.000
1.050
1.100
1.150
1.200
1.250
1.300
1.350
January-18 February-18 March-18 April-18
RTS (Russian stock exchange in $) USD/RUB
-10
-5
0
5
10
15
20
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Inflation Current account (%GDP)
Real GDP(%)
Source: Círculo de Empresarios based on IMF & Markit, 2018 13
US: upward trending economic forecastsTax reform raises growth estimates for 2018
2.92.31.5
2016 2017 2018(PMI: 54.3) (PMI: 55.1)
Real GDP (%)
Note: data for manufacturing PMI is at year-end, except for 2018, which corresponds to April
(PMI: 56.5)
Forecast
Source: Círculo de Empresarios based on BBVA Research, Barclays, 2018
14
US: politics hogs the limelight
0
0,05
0,1
0,15
0,2
0,25
0,3
0,35
Impacto reforma fiscal EEUU sobre el crecimientoPuntos porcentuales
2018 2019
Impact of fiscal reform on S&P 500 Earnings Growth Rate in 2018 (%)
2018 2019 2018 2019
Impact of US fiscal reform on growthGDP percentage points
Sectors
%
0 2 4 6 8 10 12 14
Real state
Health
Information tech.
Materials
Energy
Consumer discretionary
S&P 500
Industrials
Financials
Consumer Staples
Source: Círculo de Empresarios based on US Census Bureau, 2018
15
US: trade scenario
US Rest of the world
The US runs a deficit in the balance of trade of $796 billion (4.1% of GDP) with its trading partners around the world *
$1,546 B (8% of GDP)
$2,342 B (12.1% of GDP)
Top 5 US trade partners% total exports
Country Ranking by size of trade deficit with the US
Trade Balance Deficit: - $796 B
Exports of goods
1
2
3
4
5
China (16.4%)
Mexico(14.3%)
Canada (15%)
Japan (5.3%)
Germany (4.4%)
1
2
3
4
5
China
Japan
Mexico
Germany
Vietnam
* If services are included, the deficit is reduced to 2.9% of GDP
Source: Círculo de Empresarios based on BBVA Research, US Census, The Economist, Bruegel ,201816
US: trade protectionism (I)
US-China balance of tradeBillion $
US steel and aluminium importsBillion $
Main world steel producers, 2017%
Trump announces the intention of reducing the trade deficit with China by imposing tariffs on
1,333 goods worth more than $60,000 M
Tariff → 25% on steel and 10% on aluminium which affects
2% of its total imports of goods and 0.2% of its GDP.
-1,94%
of GDP-600
-400
-200
0
200
400
600
2011 2012 2013 2014 2015 2016 2017
Exports US-China Imports US-China Trade deficit
0
4
8
12
16
Canada EU South Korea Mexico China
4910
6
65 4
China EU
Japan India
US South Korea
Source: Círculo de Empresarios based on US Census Bureau, & European Commission, 2018
17
US: trade protectionism (II)Trump delays until June decision to impose tariffs on steel and aluminum for the European Union
US-EU Exports of goods, 2017% total*
* Percentages calculated based on volumes in €
22.5
4
44.4
21.7
5.2
2.2
Chemicals Crude, fuels and related materials
Machinery and transport equipment Manufactured goods
Food and beverages Other
-200.000
-100.000
0
100.000
200.000
300.000
400.000
500.000
2011 2012 2013 2014 2015 2016 2017
Exports Imports Balance
US-EU Exports of goodsAnnual change
-0.8%
of GDP
US: above-potential economic growth
18
Robust economic growth, although the expansionary policy may overheat its economy
Output Gap*% Potential GDP
US labour market indicators% active population and annual variation
Source: Círculo de Empresarios based on US Bureau of Labour Statistics & St. Louis Fed, 2018
Note: OG>0 implies that Actual GDP is more than Potential GDP (full-capacity production)
* Difference between Actual GDP and Potential GDP
-6
-5
-4
-3
-2
-1
0
1
2
3
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
US
Advanced economies
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
1,0
2,0
3,0
4,0
5,0
6,0
7,0
8,0
9,0
10,0
11,0
Jan-
08
May
-08
Sep
-08
Jan-
09
May
-09
Sep
-09
Jan-
10
May
-10
Sep
-10
Jan-
11
May
-11
Sep
-11
Jan-
12
May
-12
Sep
-12
Jan-
13
May
-13
Sep
-13
Jan-
14
May
-14
Sep
-14
Jan-
15
May
-15
Sep
-15
Jan-
16
May
-16
Sep
-16
Jan-
17
May
-17
Sep
-17
Jan-
18
Unemployment rate (left axis)
Annual wage growth (right axis)
US: overheating risks are looming
Source: Círculo de Empresarios based on the Federal Reserve Bank of Atlanta & NY, 2018 19
US records 107 consecutive months of economic growth
US GDP, 2018:Q2 Estimate*% Year-over-Year
Probability of recession in the US (12 months ahead)
Note: The probability of recession is calculated based on the spread between the yields on long- and short-maturity nominal Treasury securities
* Real-time indicator (GDP Now) developed by the Atlanta Fed based on more than 20 subcomponents of GDP
10.84%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Ap
r-0
6
No
v-0
6
Jun
-07
Jan
-08
Au
g-0
8
Mar
-09
Oct
-09
May
-10
Dec
-10
Jul-
11
Feb
-12
Sep
-12
Ap
r-1
3
No
v-1
3
Jun
-14
Jan
-15
Au
g-1
5
Mar
-16
Oct
-16
May
-17
De
c-1
7
Jul-
18
Feb
-19
43.9
4.1 4.14
2018-04-30 2018-05-01 2018-05-02 2018-05-03 2018-05-04
US: inflation above 2%
Source: Círculo de Empresarios based on US BLS, IMF, 2018 20
Evolution of US inflationYear-over-Year inflation
Estimates indicate that Personal Consumption Expenditure (PCE) prices will overshoot the objective of the Fed
Core PCE priceYear-over-Year inflation
Forecast
Core: excludes food and energy product prices5y5y inflation swap rate: Indicator that measures inflation expectations
1,2
1,4
1,6
1,8
2,0
2,2
2,4
Ma
r-1
7
Ap
r-1
7
May
-17
Jun
-17
Jul-
17
Au
g-1
7
Sep
-17
Oct
-17
No
v-1
7
Dec
-17
Jan
-18
Feb
-18
Mar
-18
Ap
r-1
8
PCE
5y5y inflation forward rate
0
0,5
1
1,5
2
2,5
3
Headline Core
Fed: continues with normalisation
Source: Círculo de Empresarios based on the Federal Reserve, 201821
Interest rates hike in March, to a range of 1.50% - 1.75%
US Effective interest rate%
Central Bank balance sheetMillions $ and €
3 more interest rate hikes are expected this year
0
1.000.000
2.000.000
3.000.000
4.000.000
5.000.000
Jun
-07
Ma
r-08
De
c-08
Sep
-09
Jun
-10
Ma
r-11
De
c-11
Sep
-12
Jun
-13
Ma
r-14
De
c-14
Sep
-15
Jun
-16
Ma
r-17
De
c-17
ECB FED
0,00
1,00
2,00
3,00
4,00
5,00
6,00
7,00
Oct
-99
Aug
-00
Jun-
01
Apr
-02
Feb
-03
De
c-0
3
Oct
-04
Aug
-05
Jun-
06
Apr
-07
Feb
-08
De
c-0
8
Oct
-09
Aug
-10
Jun-
11
Apr
-12
Feb
-13
De
c-1
3
Oct
-14
Aug
-15
Jun-
16
Apr
-17
Feb
-18
EU: upward revision of growth by IMF
22Source: Círculo de Empresarios based on IMF, April 2018
2016 2017 2018
Continuity in the economic expansion with signs of growth slowdown in Germany
Real GDP growth
%
1.8 2.3 2.4Eurozone
EU 28 2.0 2.7 2.5
-10
-5
0
5
10
15
20
25
ZEW Market Survey (market sentiment)
Germany: economic sentiment wanes
Consumo privado
Inversión
Exportaciones
Importaciones
1,21,5
3,83,2
3,55,1
Record lows since 2012
5,5
Source: Círculo de Empresarios based on Markit, ZEW, 2018 23
58,2
53,9
55,1
50
55
60
65
Germany PMI
Manufacturing PMI
Services PMI
Composite PMI
Signs of economic activity cooling down: (1) slipping manufacturing PMIs, (2) dwindling
investor sentiment (ZEW), and (3) declining industrial new orders
Note: a positive number means that the share of optimists outweighs
the share of pessimists
Italy: gradual loss of economic weight
Source: Círculo de Empresarios based on IMF 2018 24
38,140
38,286
41,175
30.000
32.000
34.000
36.000
38.000
40.000
42.000
44.000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
GDP per capita $ in PPP
Italy
Spain
European Union
In 2017, Spain surpassed Italy in GDP per capita ($ PPP)
Average annual growth rate 2008-17
1%
2%
2,4%
4.46
1.82
1,5
2,0
2,5
3,0
3,5
4,0
4,5
5,0
Weight of the Italian economy in the world% (in terms of $ in PPP)
0,7
0,75
0,8
0,85
0,9
0,95
EUR/GBP
United Kingdom: economic slowdown
25Source: Círculo de Empresarios based on Bank of England, ONS, 2018
EUR /GBP
Pound Sterling depreciation
Brexit (jun-16)
Surge in inflation and uncertainties surrounding Brexit negotiations
Pound Sterling appreciation
Interest rate hike(nov-17)
Q1-2018 estimate for GDP is weakest in the last 5 years
Quarterly GDP growth (%)
Slowdown in economic activity in the United Kingdom
Brexit
1.8 1.6 1.5
UK annual growth forecast (IMF)(%)
2017 2018 2019
0,9
0,5
0,9 0,9
0,8 0,8
0,3
0,6
0,4
0,7
0,2
0,5 0,5
0,7
0,3
0,2
0,5
0,4
0,1
Raw materials (I): rising oil prices
Source: Círculo de Empresarios based on St. Louis Fed, World Bank, 2017 26
Geopolitical tensions help push up the price of a barrel of oil
Weekly price of a barrel of crude oil$ Record high since 2014, severance
of Iran nuclear deal
Reasons for rise in oil price
World Bank crude oil forecast: $68
20
30
40
50
60
70
80
WTI Brent
Raw materials (II): shale oil
27Source: Círculo de Empresarios based on Bloomberg, EIA, 2018
The high levels of compliance with the OPEC-led output-cut contrasts with the growing shale oil production
% compliance with the OPEC cut
100%
US shale oil production by regionMbd (million barrels per day)
Permian Basin accounts for ≃50% of US oil drilling rigs,and its oil production has reached more than 3 mbd
Note: the higher the degree of compliance, the greater the effort in cuts
0
0,5
1
1,5
2
2,5
3
3,5
Jan
-07
Au
g-0
7
Ma
r-08
Oct
-08
Ma
y-0
9
De
c-09
Jul-
10
Feb
-11
Sep
-11
Ap
r-1
2
No
v-1
2
Jun
-13
Jan
-14
Au
g-1
4
Ma
r-15
Oct
-15
Ma
y-1
6
De
c-16
Jul-
17
Feb
-18
Eagle Ford Permian Bakken
Currency market (I): appreciation of the dollar
Source: Círculo de Empresarios based on ECB & St. Louis Fed, 201728
Expectations of rising inflation and the normalisation of monetary policy by the Fed puts
an upward pressure on the dollar
Evolution EUR/USD & US 10-year Treasury EUR/USD
1,16
1,17
1,18
1,19
1,2
1,21
1,22
1,23
1,24
1,25
1,26
1-Jan 16-Jan 31-Jan 15-Feb 2-Mar 17-Mar 1-Apr 16-Apr 1-May 16-May
1,00
1,05
1,10
1,15
1,20
1,25
1,30
1,35
1,40
1,20
1,40
1,60
1,80
2,00
2,20
2,40
2,60
2,80
3,00
3,20
May
-13
Jul-
13Se
p-1
3N
ov-
13
Jan-
14M
ar-1
4M
ay-1
4Ju
l-1
4Se
p-1
4N
ov-1
4Ja
n-15
Ma
r-1
5M
ay-
15
Jul-
15Se
p-1
5N
ov-1
5Ja
n-16
Mar
-16
May
-16
Jul-
16Se
p-1
6N
ov-
16
Jan-
17M
ar-1
7M
ay-1
7Ju
l-1
7S
ep-1
7N
ov-1
7Ja
n-18
Mar
-18
10Y Treasury (left axis) EUR/USD (right axis)
Currency market (II): emerging nations
Source: Círculo de Empresarios based on Investing, Reuters, Bloomberg, 2018 29
Financial instability in Argentina and Turkey aggravates its depreciation against the dollar
USD/ARG USD/TRY
Note: The Argentine peso is positioned as the emerging currency that most depreciates in 2018
Interest rates soar up to 40% and sale
of 8 billion dollars to control the
exchange rate
Higher-than-expected inflation and normalisation
of monetary policy press for the depreciation of
the Turkish lira
Request for financial
assistance from the IMF
18
18,5
19
19,5
20
20,5
21
21,5
22
22,5
23
1-Ja
n
8-Ja
n
15-J
an
22-J
an
29-J
an
5-F
eb
12
-Fe
b
19-F
eb
26-F
eb
5-M
ar
12-M
ar
19-M
ar
26-M
ar
2-A
pr
9-A
pr
16-A
pr
23-A
pr
30-A
pr
7-M
ay 3,5
3,6
3,7
3,8
3,9
4
4,1
4,2
4,3
1-Ja
n
8-Ja
n
15
-Jan
22
-Jan
29-J
an
5-Fe
b
12-F
eb
19-F
eb
26-F
eb
5-M
ar
12
-Ma
r
19-M
ar
26-M
ar
2-A
pr
9-A
pr
16-A
pr
23
-Ap
r
30
-Ap
r
7-M
ay
Financial markets (I)
30Source: Círculo de Empresarios based on Bloomberg, 2018
The divergence of monetary policy between the Fed and the ECB is reflected in the yield curves
240 bp
German 10-year Bund vs US 10-year Treasury
%
Germany and US yield curve, 2018
%
-0,5
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
10y US Germany 10y
-1,00%
-0,50%
0,00%
0,50%
1,00%
1,50%
2,00%
2,50%
3,00%
3,50%
3M 1Y 2y 5y 10y
US (May) Germany (May)
US (Jan) Germany (Jan)
Financial markets (II)
31Source: Círculo de Empresarios based on Bloomberg, 2018
More volatile environment
Highest level of volatility since August 2015
Implied Volatility Index (VIX) and S&P 500 World Stock ExchangesJanuary 2018=100
1500
1700
1900
2100
2300
2500
2700
2900
3100
0
5
10
15
20
25
30
35
40
VIX (left axis) S&P 500 (right axis)
90
92
94
96
98
100
102
104
106
108
Jan-18 Jan-18 Feb-18 Feb-18 Mar-18 Apr-18
MSCI World DAX S&P 500
Financial markets (III)
32Source: Círculo de Empresarios based on Yale, WSJ, 2018
Ratings above their historical averages
CAPE (Cyclically Adjusted Price-to-Earnings)* and S&P 500
CAPE: relationship between the price of the stock market and the average of EPS over the last 10 years
Average CAPE for the period analysed
24.2
S&P 500
US stock markets PER (Price-to-Earnings Ratio)Based on earnings for the last 12 months
25
Nasdaq500
1000
1500
2000
2500
3000
9
14
19
24
29
34
39
CAPE Shiller (left axis)
SP 500 (right axis)
33
Forecasts 2018: the expansion protracts... …although growth slows down
34
20172018*
2016
3.3%3.1%
2.7%
(a) Households and non-profit institutions
* Forecast
Source: Círculo de Empresarios based on Mineco, IMF & European Commission, 2018
For 2018, growth forecasts have
been revised upwards by the
IMF by 0.4 pp and the European
Commission by 0.3 pp
Macroeconomic scenario
General State Budget 2018ESA 2010. % actual var. over the same period last year
(unless otherwise indicated)
Forecasts
2018
European Commission (May. 18) 2.9%
IMF (Apr.18) 2.8%
Government (Mar.18) 2.7%
Bank of Spain (Mar. 18) 2.7%
OECD (Nov. 17) 2.3%
Real GDP 3.1 2.7GDP, current prices 4.0 4.3
Final domestic consumption 2.2 1.8
Private sector (a) 2.4 2.0
Public Administrations 1.6 1.1
Gross fixed capital formation 5.5 4.5
Changes in inventories (contribution to GDP growth) 0.1 0.0
Domestic demand(contribution to GDP growth)
2.8 2.3
Exports of goods and services 5.0 4.8
Imports of goods and services 4.7 4.1
External demand(contribution to GDP growth)
0.3 0.4
(a) Households and non-profit institutions
2017 2018
Risks in 2018
35
• Political uncertainty, predominantly in Catalonia
• Impact of rising oil prices on domestic demand and current account
• Dissipation of the reformist momentum in the face of the demographic challenge to ensure the
sustainability of the Welfare State
• Impact of the gradual reduction of ECB stimulus
• High public debt and structural deficit
• Persistence of structural unemployment
• Effects of the US protectionist policy
• Stagnation of productivity
• Moderation of growth in Europe, mainly in Germany, France and the United Kingdom
• European project conditioned by anti-European positions in Italy and Visegrad countries*
* Visegrad countries: Poland, Hungary, Czech Republic and Slovakia.
Tailwinds
36
Synchronised global economic recovery
Growth of world trade
Favourable financial conditions
Reduction of private indebtedness
Employment creation at national level
Economic growth (I): composition
In Q1 2018 growth is moderated = 2.9%
Domestic demand% year-over-year variation
2.3 pp growth contribution
Source: Círculo de Empresarios based on Minhafp & INE, April 2018 37
0.4 ppExternal demandOf goods & services
% year-over-year variation
growth contribution
• Exports = 4.8%
• Imports = 4.1%
Forecast macroeconomic scenario 2018
GDP growth 2018 = 2.7%
GDP (Year-on-Year) and contribution of domestic and external demand (pp)
• Private consumption = 2%
• Public consumption = 1.1%
• Gross Capital Formation = 4.5%
Q1 2018
2.9
-8
-6
-4
-2
0
2
4
6
PIB (variación interanual) y contribución de la demanda
nacional y sector exterior (pp)
Spain Domestic demand
Spain External demand
Spain GDP
Economic growth (II)
In Q1 2018, Spain has a positive differential with the EU, 2.9% year-on-year vs 2.4%
The evolution of the
manufacturing PMI sets the
pace of GDP growth, which has
moderated to 2.9% year-on-
year in Q1 2018
38Source: Círculo de Empresarios based on Markit, Eurostat, INE & CaixabankResearch, 2018
Manufacturing PMI for April
54,4In brackets: max value reached in Nov 2017
(56.1)
54.4
Evolution of GDP (Spain and EU) and manufacturing PMI (Spain)GDP in % var. Year-over-Year and PMI in points
Growth forecast
GDP Q2 2018 → 2.8%
40
42
44
46
48
50
52
54
56
58
-4
-3
-2
-1
0
1
2
3
4
Se
p-1
1
De
c-1
1
Ma
r-12
Jun
-12
Se
p-1
2
De
c-1
2
Ma
r-13
Jun
-13
Se
p-1
3
De
c-1
3
Ma
r-14
Jun
-14
Se
p-1
4
De
c-1
4
Ma
r-15
Jun
-15
Se
p-1
5
De
c-1
5
Ma
r-16
Jun
-16
Se
p-1
6
De
c-1
6
Ma
r-17
Jun
-17
Se
p-1
7
De
c-1
7
Ma
r-18
Evolución del PIB (España y UE) y del PMI de manufacturas (España)PIB en % var. interanual y PMI en puntos
Spain GDP (left)
EU GDP (left)
Spain Manufacturing PMI (right)
39Source: Círculo de Empresarios based on INE & Funcas, 2018
2017
Forecast 2018
Andalucía R. de Murcia
C. Valenciana
I. Baleares
ExtremaduraCastilla-La Mancha
Madrid
Castilla y León
La Rioja
Asturias
Galicia
Cantabria
P. Vasco
Aragón
Cataluña
Navarra
Canarias
3,1
2,8
Total National
2,7 2,7
3,63,1
3,52,5
2,72,3
2,9 2,4
1,92,5
3,2
2,7
2,5 2,5
3,32,2
3,22,9
3,1 3,1
3,43,3
3,0 3,1
2,83,1
3,32,9
2,4
2,7
1,82,0
GDP of Spain’s autonomous communitiesCatalonia’s growth will be below the national average owing to political uncertainty
Stagnation of productivity
40
Source: Círculo de Empresarios based on Eurostat & OECD, 2018
Spain has a negative differential in labour productivity with respect to the main advanced economies
and total productivity of factors advances at a lower rate than the average
GDP per hour worked$
Average TPF growth%
0
10
20
30
40
50
60
70
197
1
197
3
197
5
197
7
197
9
198
1
198
3
198
5
198
7
198
9
199
1
199
3
199
5
199
7
199
9
200
1
200
3
200
5
200
7
200
9
201
1
201
3
201
5
201
7
PIB por hora trabajada
$
Eurozone 19 OECD Spain
US Germany
Average growth EMU-19
2000-07: 1.3% ( 0.3%)
2008-17: 0.8% ( 1.3%)
Note: Spanish average in brackets
-0,40
0,00
0,40
0,80
1,20
1,60
2,00
2,40
2,80
3,20
Korea Sweden US Germany Spain
Crecimiento promedio PTF
%
2000-07 2008-15
OECD 2000-07
OECD 2008-15
Labour market (I)
41Source: Círculo de Empresarios based on INE, 2018
In Q1 2018, the unemployment rate increased to 16.74%, close to our structural unemployment rate,
remaining more than 8 pp above the 2007 minimum (EAPS, INE)
In year-on-year terms, unemployment was reduced by 458,900 people and 435,900 jobs were created, 30% in the public sector
The number of unemployed increased
in 29,400 people, to 3,796,100
Alarming:
• Falling activity rate: up to 58.46%, the
lowest in 12 years
• Youth unemployment rate: 36.3%• Long-term unemployment rate: 49.8%
Unemployment rate and evolution of the number of employed% active population and ’000s of people
8.01
9.6
17.24
19.8421.08
24.19
26.9425.93
23.78
21
18.75
16.74
20,753.4
16,950.6
18,874,2
16.000
16.500
17.000
17.500
18.000
18.500
19.000
19.500
20.000
20.500
21.000
8
10
12
14
16
18
20
22
24
26
28
2007Q3 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1 2017Q1 2018Q1
Tasa de paro y evolución del número de ocupados% población activa y miles de personas
Unemployment rate
Occupied
2.6 million more affiliates than 5 years ago
42Source: Círculo de Empresarios based on Ministry of Employment & Social Security, May 2018
Affiliates and registered unemployment Social Security(April 2018, SEPE)
Since its peak in February 2013 (5,040,222), the level of unemployment has fallen by 1.7 million people.
January - April 2018
Registered unemployment fell by 140,660 people to 3,335,868
Affiliation increased by 396,430 people to 18,678,461
Labour market (II): affiliation & registered unemployment
16,094,638
18,678,4615,040,222
3,335,868
0
1.000.000
2.000.000
3.000.000
4.000.000
5.000.000
6.000.000
16.000.000
16.500.000
17.000.000
17.500.000
18.000.000
18.500.000
19.000.000
19.500.000
Oc
t-0
7
Ap
r-0
8
Oc
t-0
8
Ap
r-0
9
Oc
t-0
9
Ap
r-1
0
Oc
t-1
0
Ap
r-1
1
Oc
t-1
1
Ap
r-1
2
Oc
t-1
2
Ap
r-1
3
Oc
t-1
3
Ap
r-1
4
Oc
t-1
4
Ap
r-1
5
Oc
t-1
5
Ap
r-1
6
Oc
t-1
6
Ap
r-1
7
Oc
t-1
7
Ap
r-1
8
Afiliación y paro registrado Seguridad Social
Persons
Affiliates Unemployed
Comparison of unemployment rate with the EUThe unemployment rate in Spain is double the Eurozone average
43
* Spain: data from EAPS Q1 2018, INESource: Círculo de Empresarios based on Eurostat & INE, 2018
Spain is among the 3 countries with the highest
youth unemployment rates
(<25 years)
Greece
Spain*
Italy
42.3%
36.3%
31.7%
Unemployment EU 28% over the active population, March 2018
7.1
8.5
16.74
0
2
4
6
8
10
12
14
16
18
20
22
EU unemployment, March 2018% sobre población activa
Pension system
44Source: Círculo de Empresarios based on Ministry of Employment & Social Security, January 2018
Future sustainability conditioned by:
• Evolution of payments to Social Security
• Aging of the population
• Evolution of the active population
• Improvements in productivity
Sustainability of the pension system at risk
2007 - 2017:
• Non-financial expenses grew by 3.7% annual average
• Revenues advanced 1.7% annual average
Until 2050, the Bank of Spain estimates ▲
public spending on pensions, health
and long-term care
1.5 – 2 pp of GDP ≈ 21% of GDP in 2050
Financial situation of the Social SecurityMillions €
-20.000
-15.000
-10.000
-5.000
0
5.000
10.000
15.000
50.000
70.000
90.000
110.000
130.000
150.000
170.000
190.000
Net balance (right)
Non-financial expenditures (left)
Non-financial revenues (left)
45Source: Círculo de Empresarios based on INE & Eurostat, 2018
Prices
In April, headline inflation fell to 1.1%, 0.1 pp below the Eurozone
Inflation pegged to the future by
the evolution of the oil prices
Since January, year-on-year
inflation has accelerated by 0.5 pp
Evolution of prices% year-on-year var.
0.2
3
2.3
2.6
1.5
1.8
1.61.7
0.6
1.1
1,2
0
0,5
1
1,5
2
2,5
3
Evolución de precios% var. interanual
General CPI
Core CPI
Eurozone CPI
* Excluding unprocessed food and energy
Record reduction in private indebtedness
46Source: Círculo de Empresarios based on Bank of Spain & Eurostat, 2018
The private sector has reduced its indebtedness to below pre-crisis levels while that of the
public sector continues to soar
▼31%
since 2009 as % of GDP
In 2017, the rate of reduction of nominal debt of households slowed
down to 1%, the lowest since 2010
Evolution of the debt of non-financial sectorsTrillions €
Debt of non-financial private sector% GDP
0.44
1.16
2.17
1.58
0,30
0,50
0,70
0,90
1,10
1,30
1,50
1,70
1,90
2,10
2,30
Se
p-0
8
Ma
r-09
Se
p-0
9
Ma
r-10
Se
p-1
0
Ma
r-11
Se
p-1
1
Ma
r-12
Se
p-1
2
Ma
r-13
Se
p-1
3
Ma
r-14
Se
p-1
4
Ma
r-15
Se
p-1
5
Ma
r-16
Se
p-1
6
Ma
r-17
Se
p-1
7
Ma
r-18
Evolución de la deuda de sectores no financierosBillones €
Companies
Households and non-profit organizations
PPAA
Private sector
▼27.2%
▲163.6%
From 2009
256.1
201.5
192
204.2
130.5
201.6
122.5
113
278.1
188.6
171.2
163.5
146.9
139.3 113.5
99.3
Ire
lan
d
Sw
ed
en
UK
Po
rtu
ga
l
Fra
nc
e
Sp
ain
Ita
ly
Ge
rma
ny
2009 2017 or latest data available
Public accounts (I)
47Source: Círculo de Empresarios based on Mineco, Minhafp & AMECO, 2018
Evolution of income & expenses of public administrations% GDP
Evolution of public deficit% GDP
The public sector closed 2017 having accomplished the deficit target of 3.1%
Unavailing progress made in reducing
the structural deficit despite the primary
having been reduced
Budget balance 2017-2019Lending (+) / Borrowing (-) of finance
% GDP
-7.1-6.3
-3.2
-1.8 -1.6-2.5
-3.3 -3.1 -3.1
-7.5 -7.2 -7.5 -3.5 -2.5 -2.2 -1.7 -0.6 -0.1
-9.4 -9.6-10.5
-7-6
-5.3-4.5
-3.1-2.4
2010 2011 2012 2013 2014 2015 2016 2017 2018*
Structural
Primary
Deficit
* Forecast
Balance
2017
Target
2018
Target
2019
Target
2020
Central government -1.89 -0.7 -0.3 0.0
Autonomous Regions -0.32 -0.4 -0.1 0.0
Local Entities 0.59 0.0 0.0 0.0
Social Security -1.48 -1.1 -0.9 -0.5
PPAA -3.07 -2.2 -1.3 -0.5
Note: without financial aid
45.8
40.5
38.7
41
34.8
38.9
38.3
34
39
44
Expenses
Income
58
35.6
100.4 98.3
0,0
0,2
0,4
0,6
0,8
1,0
1,2
1,4
35
45
55
65
75
85
95
105
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
Ja
n-1
8
Fe
b-1
8
Debt trillions € (right)
Debt % GDP (left)
Public accounts (II)
48Source: Círculo de Empresarios based on Minhafp, 2018
Evolution of national debt and autonomous communities% GDP
Public debt recedes to 98.3% of GDP, although its volume continues to rise
Evolution of public debt% GDP and trillions €
The level of debt remains 11.6 pp above
the average for the Eurozone
86.7% GDP
Target
60%
98.3
42.5
34.8
36
29.4
29
24.8
23.8
23.2
22.1
22.1
20.8
19.3
18.7
18.4
18.3
15.9
14.9
14.1
0 20 40 60 80 100
Spain
C. Valencia
Cataluña
Castilla-La Mancha
I. Baleares
Murcia
Total AACC
Extremadura
Cantabria
Andalucía
Aragón
Castilla y León
La Rioja
Asturias
Galicia
Navarra
I. Canarias
C. Madrid
País Vasco
2007 2017
Exp
ort
s
Capital goods
Food, beverages and tobacco
Motor vehicle
49
Balance of trade, January – February 2018 (variation with respect to the same period last year)
Source: Círculo de Empresarios based on Mineco, April 2018
Trade balance (goods)
Imp
ort
s
Capital goods
Chemical products
Energy products
Exports ▲ 4.4% 45,419.2 M€
Imports ▲ 4.6% 51,521.9 M€
BALANCE ▲ Deficit 6.3% -6,102.7 M€
Energy deficit▼ 5.8%
Sectorial distribution(% over the total)
18.7
16.7
16.7
19.7
15.9
14.9
Geographical distribution(% over the total)
Exports Imports
Europe 72.8 59.6
EU 67 53.5
America 10 10.1
Asia 9.1 21.3
China 2.3 8.9
Africa 6.2 8.7
Other 1.9 0.3
Note: data from the Customs and Excise Duties department of Spain’s Tax Agency
Evolution of energy and non-energy balance 2014-2017
% GDP
1.10.1 -0.1 -0.3
-3.5 -2.4 -1.5 -1.8
-2.4 -2.3-1.6
-2.1
2014 2015 2016 2017
Non-energy balance
Energy balance
Trade balance -9,3-8,4
-4,3 -4,9 -4,5-3,1
-1,6 -2,4 -2,3 -1,6 -2,1 -2,1
-10-8-6-4-202468
101214161820222426
% GDP Exports Imports Deficit
* 2018 GDP - forecast IMF
Balance of goods and services
50Source: Círculo de Empresarios based on Bank of Spain, 2018
Annual balance of trade on goods/services% of GDP
Prominent record figures in tourism and increase in representation of other services
0% 2007
2017
Change in the weight of non-tourist services
% total surplus of services
27%
Exports distribution of non-tourism services % total non-tourism services
Business
services
34.4
Transport
25.2
Telecoms. and
IT
17.8
Financial, insurance and
pensions
8.4
Others
14.2
2017
2.7 3.50
1.3
-8.6
-1.9
-6
2.9
2007 2017
Saldo anual de la balanza de bienes y servicios
% PIB
Tourism Non-tourism services
Goods Goods and services
Note: there is a discrepancy in the balance of trade figures between the Bank of Spain and the
Ministry of Economy due to the source of the data
51Source: Círculo de Empresarios based on Mineco, May 2018
Foreign Direct Investment (FDI)
45.5
206
28.5
2016
61.113
11
14.92017
Madrid
País Vasco
Cataluña
Rest of ACs
FDI by autonomous communities (ACs)% of total
FDI in Spain% of GDP and % annual var.
-100
-50
0
50
100
150
200
250
0
1
2
3
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
FDI as % of GDP (left axis) FDI annual variation (right axis)
The weight of Catalonia in the national FDI
has fallen by 7 pp in 2017 compared with
2016. Madrid has increased by 15.6 pp
The inflow of FDI in Spain slows down
Interest rates and risk premium
52Source: Círculo de Empresarios based on Bank of Spain & Bloomberg, 2018
The risk premium stands at 70 bp, partly explained by the upward revision of rating agencies
Spain and Italy risk premium (bp)Evolution of Spain’s credit rating 2010 -2018
Ap
r-1
0A
ug
-10
De
c-1
0A
pr-
11
Au
g-1
1D
ec
-11
Ap
r-1
2A
ug
-12
De
c-1
2A
pr-
13
Au
g-1
3D
ec
-13
Ap
r-1
4A
ug
-14
De
c-1
4A
pr-
15
Au
g-1
5D
ec
-15
Ap
r-1
6A
ug
-16
De
c-1
6A
pr-
17
Au
g-1
7D
ec
-17
Ap
r-1
8
Moody´s S&P FitchAaa AAA
AA+
AA
AA-
Aa1
Aa2
Aa3
A+
A
A-
A1
A2
A3
BBB+
BBB
BBB-
Baa1
Baa2
Baa3
Rating
60
80
100
120
140
160
180
200Spain risk premium
Italy risk premium
bp
92
96
100
104
108
Jan-18 Feb-18 Mar-18 Apr-18 May-18
IBEX 35 Eurostoxx 50 S&P 500
53Source: Círculo de Empresarios based on BME, 2018
Financial markets
Evolution of stock marketsJanuary 2018=100
Spain´s stock exchange Market Capitalization*Millions €
(April)
The stock markets are advancing in a more volatile environment
* Includes: Continuous Market (SIBE), trading pit of the four stock exchanges, Alternative Equity Market (MAB), and Latibex
Max.
500.000
600.000
700.000
800.000
900.000
1.000.000
1.100.000
1.200.000
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
www.circulodeempresarios.org
‘The quarterly report’, is a publication of the Círculo de Empresarios produced by its Department of the Economy, contains information and opinion from reliable sources.
However the Círculo de Empresarios does not guarantee its accuracy and does not take responsibility for any errors or omissions. This document is merely informative. As a
result, the Círculo de Empresarios is not responsible for any uses that may be made of the publication. The opinions and estimates of the Department can be modified
without prior warning.