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Wednesday, July 31, 2013 12:36 PM


Economic Recovery in Spain? Tax Collections, Retail Sales Prove Otherwise


In an attempt to distract voters from all the political scandals in his administration, Prime Minister Mariano Rajoy is talking about the pending economic recovery in Spain. Don't believe it.

Huky Guru at Guru's Blog in Spain takes a good look at numbers that prove Rajoy is disingenuous.

Via Mish-modified Google translation, please consider Debt Remains Uncontrolled, €40 Billion Deficit in First Half

First Half Deficit 3.81% of GDP

The government deficit totaled €40 billion in the first six months of the year in terms of national accounts, 3.81% of GDP, according to data released Tuesday by the Ministry of Finance and Public Administration.

The figure represents a decline of 8.2% compared to the same period last year, although an increase of 19.9% ​​compared to the figure recorded until May, which was around €33.3 billion.

The result of the shortfall until June due to an income reached €49.528 billion euros (+12%) and expenditure of €89.529 billion euros, up 2%.

Revenues Drop 7.1%

Cumulative to June, revenues fell by 7.1% and non-financial payments fall by 1%. What's worse, is that for nearly every euro that enters government coffers, it is burning one euro in cash.

VAT Shows Decline in Economic Activity

State revenue from indirect taxes, with €36.221 billion, an increase of 5.1%. But remember the VAT went from 18% to 21%, an increase of 17%, so that a rise of only 5.6% in revenue means that economic activity or the collection capacity of the tax has diminished.

Expenditures

On the expenditure side, the financial payments made by the State stood at €82.921 billion euros, up 1%. This result has been influenced by higher financial expenses and personnel, but were offset by declines in other chapters.

Personnel expenses stood at €13.892 billion euros, representing an increase of 1.3%, while collecting 1.9% decline in wages and salaries, to €6.798 billion euros. Social benefits grew by 5.6% on account of an increasing number of pensioners and 1% increase of pensions.

Transfer payments current until June totaled €50.551 billion, representing a decrease of 0.8%. Finally, payments for real investments, with €2.116 billion euro, fell 6.4%, while the capital transfer payments decreased by 2% to €1.961 billion euros due.
Spain's Retail Sales Decline 36th Month

Reuters reports Spain's retail sales slump stretches to three years, hampering recovery
Spanish retail sales fell for the thirty-sixth month running in June, offering a snapshot of the shrinking consumer spending that is hampering a long-awaited economic recovery.

With Spain increasingly reliant on exports to generate growth, its current account - the broadest measure of a country's terms of trade - turned to a surplus in May.

The recession has lasted since the end of 2011, though economic output fell just 0.1 percent between April and June, leading the government to state the slump was over.

Calendar-adjusted retail sales fell 5.1 percent year-on-year in June, according to National Statistics Institute data on Wednesday, while the Bank of Spain said the current account posted a 2.4 billion euro surplus in the previous month.

Spain's unemployment rate is above 26 percent. That has impeded spending on the high street, as have the high budget gaps that have forced the government of Prime Minister Mariano Rajoy to cut expenditure and hike taxes.

"Whenever the economy starts breathing, you'll have additional pressure to start cutting the deficit, so we get in to additional austerity and spending will fall. It's going to be a choppy ride," Moec said.

"Of the IBEX companies, practically the only thing carrying them are contracts and business volume out of Spain," said Pedro Alvarez, trader at Banco Sabadell.

"If you look at (Spain's largest department store) Corte Ingles, which is having problems, you get a good idea of how things are going in the country."
Spain finally met its revised-four-times-lower deficit targets. Don't mistake that for an economic recovery.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com


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