Thursday, May 29, 2014

Quick Spanish GDP


Up 0.4%.

Big internet stink about the government spending component, the 3.9% 13Q4 drop having been recuperated in its entirety in Q1 this year. This goes back to a less-than-well understood advancing of the government expenditure approval date to late November in an attempt to bring the deficit into line with predictions. Some stuff got passed on to January.

Zzzzzzz. Do you really actually care what quarter the money was spent in?

Otherwise... big negative, as usual, was construction. Household spending and capital spending (ex-construction) up.  Imports also up, as to be expected from the previous line (with the usual suspect still trying to make this into something that it isn't), and exports down. All pretty much in line with a slowly expanding economy.


Up 0.5%.

Household spending up 1.6%. Government spending down 0.2%. They pulled a version of the same trick last year. (Here's Dr. John's guru commentary on that). Construction, again, down 8.7%. Other fixed capital formation - you know, companies spending money on, mainly imported, equipment because they think that'll be a profitable move going forward - up a whopping 11.1%. Exports up 8.1%. Imports 9.3%.

Same story, only more of it.


Monday, April 28, 2014

No Edward, that's not how it works

Edward Hugh has returned to blogging. In his latest piece, the resident British expert on all things Spanish and economic has come to the splendidly silly conclusion that the principal impetus behind Spain's recently improving GDP is a decline in imports with respect to last year. A decline in imports.

In his own words:
Since imports were down by more than exports, net trade was positive and contributed an estimated 0.2 percentage points (or half) to growth. If imports had fallen by less, by say only 0.6%, then Spanish GDP would only have grown by half (0.2%), such are the quirks of GDP calculations.
With all due to respect, he's attributing  'quirks' to the wrong party.

The whole purpose of deducting imports from the GDP figure is to ensure that they have no impact whatsoever, neither positive nor negative, on the measurement of a country's economy. We'll let the BEA do the explaining:
The value of imports is already included in the other expenditure components of GDP, because market transactions do not distinguish the source of the goods and services. Therefore, imports must be deducted in order to derive a measure of total domestic output.
The effect that GDP methodology has on Hugh's observation can be set out pretty simply. If, as he proposes, imports were to have fallen 'say only 0.6%'  every last euro of whatever the corresponding amount might have been would have also shown up in one or another consumption category of the national accounts. Immediately removed by subtracting imports*,  their effect would have been.... zero. GDP would not have fallen, risen, moved sideways or gone for a swim in the Blue Lagoon.

Imports do not contribute to, or deduct from, GDP. They are not even counted. End of story. And all of that rise in Spanish first quarter is attributable to, mirabile dictu, increased economic activity.

*The main difficulty people have in understanding this simple relationship is that the economics profession often obfuscates it behind the irrelevant fact that two of the elements, exports and imports, of the GDP calculation also, in another context, produce the figure known as 'net trade'. 

The formula, typically expressed as C+G+I+X-M (X -M, coincidentally, being the trade balance) is a breeding ground for confusion. Writing it as ((C+G)-M)+I+X would probably make the real functions of everything here a bit more self-evident. But, honestly, we wouldn't expect a 'macroeconomist' to be fooled by this artefact.

Then again, it's not the first time (but the second or third) that Ed Hugh has had trouble coping with the relationship between the domestic and external sectors in the national accounts.

**The funniest part of the whole thing is there's now a whole cottage industry of Spanish commentators claiming that the government is doctoring import statistics - to the downside - in order to give a fake boost to GDP. The noise-o-sphere at its very finest.


Tuesday, December 17, 2013

You can't make this stuff up (Catalan referendum version)

A quick Google search shows that the English-language press is having a bit of difficulty understanding the structure of the Catalan independence referendum recently announced for November 9, 2014. Contrast what The Guardian, in perfect consonance with every other article I troubled to read, says about it...
 The Catalan regional government head, Artur Mas, said the vote would ask two questions: "Do you want Catalonia to be a state?" and: "Do you want that state to be independent?"
...with the more accurate Wikipedia version.
The question would be: "Do you want Catalonia to become a State?" and "If yes, should Catalonia be an Independent State?"
Now that Ibex Salad readers have that minor detail straight in their minds, I have two questions of my own to ask. Does this really mean that those who vote 'no' on the first question will be excluded from opining on the second? And if this is so, as seems to be the case, what rules will the promoters of this plebiscite use to determine which independence option - yes, or no - has won the day?

Behind this bizarre form is that one of the political parties supporting the referendum is, in fact, not separatist but wants Spain to become a federal state. The first question was included to give voice to their aspirations. But it has the effect of dividing the three competing political ideologies - separatist, federalist and centralist (being those that think the current situation is optimal) - into two groups of two. Stage one aligns the first two persuasions, as if they were one, against the last. Then, in stage two their fundamental differences come again to the fore and they face off against each other, excluding the third from the game entirely. Imagine a football championship in which Real Madrid (typically) loses against Barça, then the latter splits into two teams and fights for the championship trophy amongst itself.

Until someone steps up and definitively answers my second question, I'll refrain from coming to any conclusions concerning the not-entirely-aligned motives and strategies of Artur Mas and Oriol Junqueras.


Just in ----- Artur Mas seems to be aware of this issue. It seems, though, that he and his political partners have just decided to pass on it for the time being. "It's not what matters at the moment." (via Vicente Valles)


Saturday, November 23, 2013

Deflationary Death Spiral sighting

Something for Spaniards to keep in mind next time they come across one of their elite corps of economics journalists spewing out the standard version. 

What with CPI printing negative in October, we though that it would be in the public interest to assist the beleaguered citizens of Spain in taking full advantage of the Deflationary Death Spiral* into the vortex of which their beloved patria is about to descend. The following list of October's bad actors provides a story you can tell yourself as you - homeland be damned - hoard your money and lasciviously lust over those deals you're going to score as Armageddon arrives.

CPI Category
Rationale for delaying spending in anticipation of lower prices
I’m lining up at the Apple Store waiting for lower prices.
Let's talk next month. It'll be cheaper.
This one's got potential (too bad sales are up 34% YoY)
Vehicle parts & repairs
Spreadsheet > calculate fuel savings on 3 cylinders vs cost of repair.
Watch this week's Walking Dead.... next week.
Household Appliances
No problem. I like sushi.
Hospital services
They're offering a special on biopsies in August.
Personal articles
In the meantime, just tear up a few rags.
Household textiles
(see previous)
Sports & recreation goods
Trending > air football
Home rent
If we don't pay, the landlord'll charge us less next month.
Home repairs
Leak? No problem. Cut the mains.
Sports & recreation services
I'll exercise twice as much next month (multipurpose rationalization)
I love Benidorm in January.
Personal goods & services
Let hair grow. Call myself an indignao. (Won't work for Luís de Guindos.)
I'll hedge my insulin habit with a Viagra short.
Financial services
Cash is king, anyway.


Thursday, November 14, 2013

Warehouse 13

The graph on the left, a tad cherry picked from the famously high youth unemployment statistics and the almost entirely unnoticed (and coincident) dramatic surge in the female over-40 labour force, gives a hint as to how the oft-cited Spanish family support system appears in the INE database. The fact is that the 2.3 million job losses borne by young people between 16 and 29 years old since the end of 2007 have been accompanied by an increase in the labour force group to which their mothers belong of 1.2 million. There's a certain amount of double counting here as more than one family member goes looking for a single job.

Not that it's going to inhibit the production of pre-packaged commentaries, but we think it's worth pointing out that maybe the standard American labour market take - that participation decreases during recessions as job seekers become discouraged - doesn't exactly apply to Spain. In fact, it might be appropriate to believe that employment gains at the young end of the scale might produce an inordinately large drop in active population, and that the consequent extra decline in the unemployment rate is a Good Thing - not a fantabulous evil conspiracy designed to obfuscate the true irremediability of the situation (or, alternately, to give a boost to the credibility of the commentator noting it). After all, there is some evidence here that each job loss produced one-point-something job seekers over the course of the last six years. If you want, you can see a scatter plot of the same series here.

Lastly, I don't have any trouble convincing myself that the giant warehouse of human availability known as 'the unemployed' is operated on a FIFO basis - first in, first out. In order, the collapse of the building industry hit participants like this:
1). Illegal, undocumented labour
2). Part-time
3). Temporary
4). Full-time permanent
Cruel and unsatisfactory as it may be, recoveries work in reverse order. We know that most official jobs created recently have been of type 2 and 3. The reader can rest assured that the two negative prints at the end of the chart tell us that there's activity in the grey market as well.

A multitude of binary beings populating the noise-o-sphere will likely come to the conclusion that I believe that everything is really alright. It's not. Obviously. I am not threatening your credo.

Also, the invaluable Chris Dillow gives us a couple of object lessons in the interpretation of labour force stats. They can be read here and here. Worth the effort.