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Quarterly Report Q3 2015 Circulo de Empresarios
The quarterly report summarizes economic indicators for Spain and other regions in Q3 2015. Spain's GDP growth is predicted to slow to 0.8% in Q3 due to deteriorating global growth prospects and risks to the domestic political scene. Private consumption and investment are driving Spain's growth, contributing to a predicted annual GDP growth of 3.2% in 2015. Exports increased by 4.5% while imports rose by 5.5% in the first seven months of 2015.
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Quarterly Report Q3 2015 Circulo de Empresarios
- 1. Quarterly Report on theSpanish Economy Q3 2015 Círculo de Empresarios Madrid, October 2015
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- 3. GDP PREDICTIONS 2015 3 Unevenpath of growth USA 3.1% Mexico 3% Brazil -1% Spain 2.5% UK 2.7% France 1.2% Italy 0.5% South Africa 2% India 7.5% China 6.8% Russia -3.8% Japan 1% ASEAN-5 5.2% Australia 2.8% Germany 1.6% USA 2.5% Mexico 2.5% Brazil -1.5% Spain 3.2% UK 2.5% France 1.3% Southafrica** 2% India 7.6% China 6.7% Japan 1% Asia* 4.9% Australia 2.3% Germany 1.5% Canada 1.5% Eurozone 1.5% Latin America 0.3% Pacific Asia 5.7% Russia -3.8% Source: BBVA Research, September 2015 *Excludes China **OECD
- 4. Global growth Source: Círculode Empresarios based on La Caixa Research, 2015 4 2013 2016 2014 2015 20162015 Forecasts Moderation in global growth China continues desacelerating Further weakness in Brazil in 2015 -4 -2 0 2 4 6 8 10 Real GDP growth and forecasts % Advanced Emerging China Brasil Global
- 5. Impact of China’sdesaceleration -0.47% EMERGING GLOBAL ADVANCED -0.31% -0.11% Source: Círculo de Empresarios based on Bank of Spain, 2015 5 Impact on real GDP growth in case of a reduction in potencial growth and domestic demand of 1 percentage point in China (average 2016-2018)
- 6. China: evolution andgeographical distribution of the external sector China’s main customers % of exports ,2014 Source: Ciírculo de Empresarios based on Santandertrade, 2015 China’s foreign-exchange reserves fell by 285 billion $ since 2014 USA: 17% Hong-Kong, China: 15,5% South Korea: 4,3% Japan: 6,4% Germany: 3,1% China’s main suppliers % of imports, 2014 USA: 8,2% Australia: 8,2% South Korea: 9,7% Japan: 8,3% Germany: 5,4% 6 External sector Reserves $ Sharp fall in imports were driven by falling domestic demand 3,8 trllion $ 3,55 trillion $ -5,5 -13,8 3.400 3.500 3.600 3.700 3.800 3.900 -20 -15 -10 -5 0 5 10 2013 2014 Q1 2015 Q2-2015 jul-15 aug-15 Currency reserves Exports Imports Tendency Current account and currency reserves evolution %, billions $ aug-15 Renmimbi depreciation (3%) Jul-15 Aug-15
- 7. China: volatility infinancial markets Shanghai Composite evolution Jun14-sep-15 Jun-14 Apr-14 Jun15 Sep-151.000 1.500 2.000 2.500 3.000 3.500 4.000 4.500 5.000 5.500 2012 Nov-14 Sep -20154 5 6 7 China’s interest rates evolution 2012-actually May-15 Aug-15 5 cuts since november 2012 Time variation Interest rate 06 Jul 2012 6% 21 Nov 2014 5,6% 28 Feb 2015 5.35% 10 May 2015 5.10% 27 Jun 2014 4,85% 25 Aug 2015 4,6% Source: Círculo de Empresarios based on Reuters and Bloomberg, 2015 Interest rates variations 7Source: Círculo de Empresarios based on Reuters and Bloomberg , 2015 Chinese stock market is a reflection of the health and monetary policy in China
- 8. China: indebtedness Source: Círculode Empresarios based on BIS, IMF and Natixis, 2015 8 China Public debt evolution in % of GDP Debt evolution by sectors in % of GDP Japan and China: 7 years of debt-increasing Source: Círculo de Empresarios based on BIS, 2015 Japan: indebtedness focuses on the public sector (222% of GDP) China: high private debt (193% of GDP) Japan 46,2 % 247 % 150 200 250 300 20 30 40 50 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 China Japan 66% 105% 222% 393% 36% 157% 41% 235% 0 50 100 150 200 250 300 350 400 450 Families Companies Government Total Japan China
- 9. Brazil: financial marketsturbulences Brazilian exchange rate (USD/BRL) , Jan14-Sep15 9 40.000 42.000 44.000 46.000 48.000 50.000 52.000 54.000 56.000 58.000 60.000 2,0 2,5 3,0 3,5 4,0 4,5 Jan-14 Jan-15 Sep-15Sep-14 May-15 Jul-15 Aug-15 Sep-15 Brazilian stock market (BOVESPA), May15-Sep15 points Source: Círculo de Empresarios based on Bloomberg, 2015 BRL/USD BOVESPA Jan15-Sep15: -52% Sep14-Sep15: -66% Jan15-Sep15: -4% Sep14-Sep15: -17%
- 10. Lower commodity prices 10 54% 48% AluminiumCopper Zinc 46% 31% Gold 23% Oil 12% China’s share of global consumption % of global consumption -12% -8% -4% 0% 4% 8% 12% Oil volatility Jul-15 Ago-15 Sep-15 Change in commodity prices YoY, YTD Source: IMF, 2015 * Copper,Aluminium , Gold, Iron, Tin, Nickel, Zinc, Lead * Source: World Economic Fourm, 2015 Partly due to China’s weakness Cotton -15% -8,70% -3,40% -11% -30% -52% -54% -20% -60% -50% -40% -30% -20% -10% 0% Metals Fuel Petroleum Non-Fuel aug14 - aug15 jan15-aug15
- 11. Latin America: Growthand prices 11 Latin America GDP outlook for 2015 and 2016 % Source:,Círculo de Empresarios based on IADB , 2015 Inflation expectations for Latin America, 2015 and 2016 % Will incease in 2015 Will increase in 2016 Downward revision to Latin American growth, excluding Mexico and Chile Prices in Latin America remains heterogeneous= 4 3 3,7 3,5 2,5 2,5 2,3 2,8 4,2 4 3,7 3,6 3,2 3,1 3 2,5 0,3 -1 0 1 2 3 4 5 2015 2016 2015 revised estimate -1,7 0 2 4 6 8 10 2015 2016
- 12. USA: the economygradually expands Unemployment continues to recede gradually Consolidation in employment growth and a lower labor force participation rate at the time Labor force and unemployment rate (%) 12 Source: Círculo de Empresarios based on Bureau of Labor Statistics, 2015 Employment change Not in labor forceNot in labor force and employment change Miles (left axis) (right axis) L. Force 62,6% August unemployment rate: 5,1% 0 2 4 6 8 10 12 58 59 60 61 62 63 64 65 66 67 68 Labor force participation rate Unemployment rate 0 10.000 20.000 30.000 40.000 50.000 60.000 70.000 80.000 90.000 100.000 -1000 -800 -600 -400 -200 0 200 400 600 Employment change Not in labor force (left axis) (right axis)
- 13. Contribution to percentagechange in GDP growth (pp) USA: GDP continued growth momentum 2Q-2015 GDP: 17.913 trillion $ Source: Círculo de Empresarios based on Bureau of Economic Analysis, 2015 USA GDP Growth, YoY , Favourable external sector Much stronger acceleration in private consumption 13 1,9 1,1 3 3,8 -0,9 4,6 4,3 2,1 0,6 3,9 -2 -1 0 1 2 3 4 5 3,9% 0,6% -4 -2 0 2 4 6 Real GDP Personal consumption Private investment External sector Public consumption 1Q-2015 2Q-2015
- 14. Stock markets Changes instock markets YTD 14 Higher profitability ITALY Source: Círculo de Empresarios based on Bloomberg, 2015 -3% 2,2% -9,20% 8% -8% -4% -0,35% -22% -17% -21% -14% -12% -21% -17% -30% -20% -10% 0% 10% DAX CAC-40 IBEX-35 FTSE-MIB S&P 500 EURO STOXX Nikkei Since max. jan15-sep15
- 15. Impacts resulting fromstock markets Effects associated with a fall in stock markets (20%) and a sharp hike in interest rates (100 basic points) in global stock markets (average 2016-2018) -0.15% ADVANCED GLOBAL EMERGING -0.13% -0.12% 15Source: Círculo de Empresarios based on Bank of Spain, 2015
- 16. Exchange rates adjustments Currencydepreciations against U.S. dollar YTD Further depreciation and volatility of the euro against the US dollar Expectations of an imminent increase in monetary policy rates in the United States Fuente: Bloomberg, 2015 16 The only currency which appreciates against the US dollar: Swiss franc: +2% Source: Círculo de Empresarios based on ECB, 2015 Euro – dollar evolution Jun14 -Sep15 Jun-14 Mar-15Jan-15 Sep-15 (right axis) (left axis) -6% -2,70% -2,40% -14% -13% -17% -14% -20% -15% -10% -5% 0% Euro Pound Renminbi Norwegian krone Australian dollar Canadian dollar Russian ruble 0 0,2 0,4 0,6 0,8 1 1,2 1,4 1,6 -3% -2% -1% 0% 1% 2% 3% Period to period change Eur/usd
- 17. Risks 17 Source: Círculo deEmpresarios
- 18. Refugee crisis inEurope 18 Main entry routes to Europe, January-July 2015 Spain 6,698 From: - Syria: 57% - Guinea: 10% - Côte d´Ivore: 5% Italy 91.302 From: - Eritrea: 26% - Nigeria: 12% - Sub-Saharan Africa: 11% Greece 132,240 From: - Syria: 59% - Afghanistan: 25% - Pakistan: 5% Hungary 102,342 From: -Afghanistan: 29% -Syria: 28% - Kosovo: 23% Possible contribution to GDP growth +0.2 pp (Source: Credit Suisse, 2015) Source: OECD, 2015
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- 20. Obstacles to growth 20 Deterioratingglobal growth prospects Slow down in the emerging economies, notably China Restraint of euro depreciation Spain political scene Increase in Spanish risk premium 1 2 3 4 5
- 21. Development of growth 21 Possibleweaker growth in 3Q 2015 = 0.8% 0.9 1 0.8 -0,5 0 0,5 1 1Q 2015 2Q 2015 3Q 2015* GDP Q/Q change, 1Q - 3Q 2015 Domestic andexternal demand contributionto GDP growth (pp) * Estimated -8 -6 -4 -2 0 2 4 6 1Q 2003 4Q 2004 3Q 2006 2Q 2008 1Q 2010 4T 2011 3Q 2013 2Q 2015 GDP (y/y change) Domestic and external demand contribution to annual growth (pp) Domestic demand External demand GDP Source: Círculo de Empresarios, based on INE and Bank of Spain, 2015
- 22. Composition of growth 22 Predictions2015: GDP annual growth = 3.2% Regarding the 2Q 2015, the increase in gross fixed capital formation (GFCF) is the largest among the components of domestic demand • Private consumption = 3.4% • Public consumption = 1.1% • GFCF = 6% • Exports = 5.1% • Imports = 6.2% Domestic demand 0.2 pp 3.4 pp External demand contribution to growth contribution to growth Source: Círculo de Empresarios, based on FUNCAS (September 2015)
- 23. Construction and housing 23 Fromthe 1Q 2014, recovery in the investment in construction 98 99 100 101 102 103 104 105 106 107 2015Q22015Q12014Q42014Q32014Q22014Q12013Q42013Q3 Investment in construction: housing and others Index 100 = 2Q 2008 Total Housing Others Source: Círculo de Empresarios based on INE, 2015
- 24. Prices 24 Energy prices dragdown inflation Spanish competitiveness gain -2,0 -1,0 0,0 1,0 2,0 3,0 4,0 5,0 6,0 Annual development of Spanish general CPI and of Eurozone HCPI y/y % Spain Eurozone Source: Círculo de Empresarios based on INE and ECB, 2015
- 25. 25 Exports January – July2015 (y/y change) 4.5% (to 161,507.3 M€)Imports 5.5% (to 148,630.8 M€) Trade balance 6.1% in DEFICIT (to 12,876.5 M€) 30.5% in energy deficit, because of lower energy prices Geographic distribution (%) SECTORS: TOP 3 ExportsImports EU Rest of Europe 5.8% 64.6% EU Rest of Europe 55.7% 5.3% China 8.3% Source: Círculo de Empresarios based on Ministry of the Economy, September 2015 External sector Exports % / total Imports % / total Capital assets 19.7 Capital assets 19.8 Automobile 17.2 Chemistry 16.3 Food, beverage and tobacco 16.2 Energy 14.7 Source: Círculo de Empresarios based on Ministry of the Economy, September 2015 EUROPE 61 ASIA 18.7 AMERICA 11 AFRICA 8.9 Others 0.3 EUROPE 70.4 AMERICA 11.4 ASIA 9.6 AFRICA 6.5 Others 2.3
- 26. 0% 0,0% 0,1% 0,2% 0,3% 0,4% 0,5% 0,6% Limited direct exposureto China and Greece 0,0% 0,2% 0,4% 0,6% 0,8% 1,0% 1,2% 1,4% 1,6% 1,8% 2007 2008 2009 2010 2011 2012 2013 2014 2015 0,0% 0,2% 0,4% 0,6% 0,8% 1,0% 1,2% 1,4% 1,6% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Exports from Spain to China, % of total exports Exports from Spain to Greece, % of total exports Source: BBVA Research, Datacomex Source: BBVA Research, Datacomex Source: BBVA Research, BIS Source: BBVA Research, BIS Financial assets in China % of each country GDP Financial assets in Greece % of each country GDP Low exposure Low exposure 26 0% 0% 2% 4% 6% 8% 10% 12% UK USA Japan Taiwan, China France Germany Spain
- 27. Risk premium 27 Spanish riskpremium slightly over the Italian one 0 100 200 300 400 500 600 Development of Spanish and Italian risk premium with respecto to 10 years German bond yield Spain Italy Source: Círculo de Empresarios based on ECB and Bank of Spain, 2015 110 115 120 125 130 135 140 145 150 155 02-sep. 04-sep. 06-sep. 08-sep. 10-sep. 12-sep. 14-sep. 16-sep. 18-sep. 20-sep. 22-sep. 24-sep. 26-sep. 28-sep. 30-sep. Risk premium Spain-Italy SEP. 2015
- 28. SMEs loans 28 Funding conditionsare impoving for Spanish SMEs Financial costs in Spain continue above those in the Eurozone 2,5 3,0 3,5 4,0 4,5 5,0 5,5 6,0 6,5 7,0 Bank interestrates - new loans to SMEs * (%) Eurozone Spain * Loans of up to EUR 1M Source: La Caixa Research based on ECB, 2015
- 29. 0 200.000 400.000 600.000 800.000 1.000.000 1.200.000 1.400.000 mar.-08 jul.-08 nov.-08 mar.-09 jul.-09 nov.-09 mar.-10 jul.-10 nov.-10 mar.-11 jul.-11 nov.-11 mar.-12 jul.-12 nov.-12 mar.-13 jul.-13 nov.-13 mar.-14 jul.-14 nov.-14 mar.-15 jul.-15 Debt: PPAAs, non-financialcorporations and households Millions of euros Public Non-financial coroprations Households Source:Círculo de Empresarios basedon Bank of Spain, 2015 Development of debt 29 In absolute terms: • Increase in public debt • Deleveraging of private sector TOTAL (July 2015) 246.4% of GDP Public 94.7 Non- financial corporations 84.9 Households 66.8
- 30. Public accounts: Regional administrationsfail to carry out deficit target for 2015 30 Galicia -0.21% Between January and July 2015: Total deficit = 7,900 millions of euros = 0.73% of GDP Target 2015 = 0.7% Regional administrations fiscal balance % GDP Asturias -0.22% Cantabria -0.46% Basque Country -0.21% La Rioja -0.01% Navarre -1.39% Aragon -0.95% Catalonia -0.76% Valencian Comunity -1.02% Murcia -1.3% Andalusia -1.02% Balearic Islands 0.39% Canary Islands -0.59% Extremadura -1.42% Castile and Leon -0.71% Madrid -0.75% Castile-La Mancha -0.63% Source: Círculo de Empresarios based on Ministry of Finance, 2015 Deficit above the target Deficit below the target Superavit
- 31. 31 Labour market In August,Social Security system revenues increased by 1.35% y/y (to 65,800 millions of euros). 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 20.000.000 2007 2008 2009 2010 2011 2012 2013 2014 2015 Affiliates Evolutionof affiliationtoSocial Security and registered unemployment Persons Affiliates Unemployed Unemployed Source:Círculo de Empresarios basedon Ministryof Employment and Social Security, Sep. 2015
- 32. 32 Spain´s position ininternational rankings
- 33.