• The contraction in the fourth quarter was 0.8% and 1.9% compared to the previous year
  • External demand contributes 2.8 points to GDP thanks to improved exports
  • Financing capacity vis-à-vis abroad increases for the second consecutive quarter
  • Job destruction stands at 4.4%, with an average annual loss of 768,650 jobs

The Spanish economy registered a contraction of 0.8% in the fourth quarter of 2012 with respect to the previous quarter, thus intensifying its fall rate by five tenths. The recession thus continues for five consecutive quarters. In year-on-year terms, GDP decreased by 1.9%, three tenths more than in the previous quarter. On the average for the year, the decrease was 1.4%, one tenth lower than the Government's forecast.

Net external demand continued to evolve positively, with a contribution of 2.8 percentage points to the year-on-year rate of GDP in the last quarter, four tenths more than in the previous quarter. In contrast, domestic demand continued to slow growth and subtracted 4.7 points from the year-on-year change in GDP (seven tenths more than in the third quarter).

The positive contribution of net external demand to growth was due to the expansionary behavior of exports, which increased by 3.2% annually – those of goods grew by 3% and those of services by 3.6% -. This favorable evolution was less intense than that of the third quarter (4.2%), mainly as a consequence of the loss of momentum in demand in the countries of the Euro Zone.

Imports decreased by 5.4% year-on-year, two points more than in the previous quarter, with a steeper drop in the case of goods (6.1%) than in services (3.1%). The intensity of the decline in imports offset the more moderate growth in exports, so the result was an even more positive contribution of net external demand to aggregate growth.

The analysis of the components of national demand reflects a greater year-on-year drop in household final consumption expenditure (-3% compared to -2.1% in the previous period). In quarterly rates the difference was even greater (-1.9% in the fourth quarter compared to -0.5% in the third quarter). This evolution was largely conditioned by the effect of the entry into force of the new VAT rates on September 1 of last year. For their part, the Public Administrations reduced final consumption demand with greater intensity (a fall of 4.1%, one tenth higher than that of the third quarter). The restrictive tone of the expenditure of the administrations that had been taking place since the beginning of the year was accentuated during the second semester, once a good part of the consolidation measures of the autonomous communities came into force.

Gross fixed capital formation registered a year-on-year drop of 10.3%, six tenths more than in the previous quarter. This record was due to the lower pulse of investment in equipment, which fell 7.9% (7% in the third quarter), since construction investment reduced its fall by one tenth (it went from -12.4% in the third quarter to -12.3% in the fourth).

On the supply side, according to branches of activity, both industry and construction moderated their year-on-year rates of decline five and four tenths in the quarter (-2.4% and -8.5%, respectively). On the contrary, services accentuated their decline, going from falling 0.6% in the third quarter to -1.2% in the fourth. This fall is mainly associated with the fall in final consumption demand, both public and private.

The rate of job destruction increased in the fourth quarter, one tenth in year-on-year terms to -4.7% and seven tenths in quarter-on-quarter data, down to -1.6%. Consequently, the apparent productivity per employed person decelerated two tenths in the annual rate, up to 2.9%. As the remuneration per employee went from growing 0.1% year-on-year in the third quarter to falling 3% in the fourth, unit labor costs fell 5.8%, double that in the previous quarter. This prolongs the trend towards increasing external competitiveness that the economy has been showing since the beginning of the crisis.

Regarding the nominal variables, the GDP deflator slowed half a point in the annual rate, to 0.1%, mainly due to the evolution of the public consumption deflator, which decreased by 5.6% due to measures to contain the remunerations of the sector. The moderation of the export deflator also stood out (it reduced its annual rate by one tenth, to 1.8%). With all this, the GDP at current prices accelerated its fall seven tenths, to -1.8%.

For the second consecutive quarter, the Spanish economy registered external financing capacity, specifically 9,500 million euros in the last quarter of last year compared to the need for financing of 6,171 million euros a year earlier. In terms of nominal GDP, it represents a financing capacity of 3.6%, which represents a substantial correction compared to the financing need of 2.2% of GDP in the fourth quarter of 2011.

In short, 2012 was a year of significant corrections to the imbalances in the Spanish economy, which lay the foundations for future recovery and were compatible with a contraction in activity less than that foreseen by the Government. That year, the Spanish economy contracted 1.4% on an annual average, a drop that improves the official government estimate for the 2013 PGE by one tenth.

At the same time, the correction of the imbalances was also of greater magnitude than initially anticipated: the balance of the current account balance of payments decreased from 3.7% to 0.8% of GDP and the need for financing, from 3.2% to 0.2% of GDP. This strong improvement was not only due to cyclical circumstances but also to a good performance of exports in a context of weaker growth than expected also for the main trading partners. This correction was helped by the moderation of unit labor costs (-3.5% in annual average), also favored by the labor reform.

The other side of the fall in production was the destruction of employment, which in 2012 reached 4.4% (2.7 points more than in 2011), which meant an average loss of 768,650 jobs on time for the year. full. However, the labor reform has optimized the functioning of alternative channels of adjustment of the labor market other than the dismissal of workers and thus improves the relationship between the fall in GDP and that of private employment.

The greater fall in activity and employment in the last quarter of 2012 is explained by the concentration in that period of a large part of the measures adopted last year and by the deterioration in the activity of our commercial partners. With the correction of the imbalances reached, the exhaustion of the restrictive effects of the measures and the gradual international recovery, it is expected that the contractionary trend will moderate in the coming quarters to reverse it later, so that the worst moments of the current economic situation.

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