Spain Consumption Outlook
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Consumption Outlook
Madrid, 29 May 2012
Consumption Outlook, 29 May 2012
Page 2
Key themes
1
2
3
Europe decoupling from the global economy growth while the region continues to await a long-term plan to boost economic activity and allow sovereign risk to be spread in exchange for structural reform and better coordination
Spain's GDP is still expected to contract in 2012 (by 1.3%), before gradually recovering in 2013. However, this outlook now appears less certain
Building up confidence now depends on the design, execution, and communication of a credible set of reforms
Weaker drivers point to declining consumption in 2012 and the first half of 2013, especially for durable goods
Lingering financial stress and high default levels, and, in particular, the expectation of weak demand do not point to an increase in consumer credit in the short term
Worsening expectations by households account for 80% of the fall in demand for consumer credit in the current crisis
4
5
6
Consumption Outlook, 29 May 2012
Page 3
Section 1
International environment: continued global growth and persistent risks in Europe
Section 2
Spain: recession confirmed, although it is not worsening. Ongoing reforms will increase growth
Section 3
Consumption: weaker drivers point to declining consumption in 2012 and the first half of 2013
Section 4
Demand for durable goods: is there any?
Contents
Consumption Outlook, 29 May 2012
Page 4
Section 1
Europe decoupling from global growth
GDP growth (% yoy)Source: BBVA Research
The debt crisis continues, with Portugal under the spotlight and concerns about Spain
High levels of financial stress in Europe, with a risk of a tightening of credit
Stability Treaty: towards Maastricht 2.0More emphasis on growth
Expansive, yet differing, monetary policies by the Fed, the Bank of Spain, and the ECB
A slow, disparate, and vulnerable recovery
3.6
4.0
0.9
2.3 2.2
5.8
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-0.2-1
0
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2012
2013
2012
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2012
2013
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2013
Global EMU US EAGLES
May-12 Feb-12
Consumption Outlook, 29 May 2012
Page 5
Significant progress... ... Although significant challenges remain
Insufficient progress → Risk continues to rise
Restructuring Greek debt and moving up the ESM
Provision of long-term liquidity by the ECB
Reforms in Portugal, Spain, and Italy
Approval of the Stability Treaty
1. Uncertainty in Greece
3. Growth plan
4. A clear roadmap to "another" fiscal union
2. Need for an effective firewall
ESM may indirectly contribute to capitalising financial institutions 5. Need for greater financial integration
Section 1
The European crisis continues
Consumption Outlook, 29 May 2012
Page 6
Section 1
1. Uncertainty in Greece and Portugal
Greece and Portugal: public debt forecasts (% GDP)Source: BBVA Research and IMF
Greece: ambitious targets, but uncertainty following elections, and a deep recession
Portugal: despite significant progress, there is no guaranteeing Greece's return to capital
markets in 2013
The risk of setbacks remains high
40
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2010
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2012
2013
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2015
2016
2017
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2019
2020
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2030
Portugal Greece** Scenario for Greece: assumes 95% of bondholders will participate in the haircut, 3% growth in 2015, and a primary surplus at 4.5% of GDP starting in 2014 (2.4% primary deficit in 2011)
Consumption Outlook, 29 May 2012
Page 7
Section 1
2. Need for an effective firewall
New lending capacity: €500bn(+ €200bn already committed by the EFSF)
The EFSF can continue to lend through mid-2013, so as to enable the capitalisation of the ESM
What is more important is that the available funds be used efficiently: they should not crowd out private demand
The increase in IMF funds (€330bn)
The debate centres on the amount of resources available, but it encompasses much more:
Consumption Outlook, 29 May 2012
Page 8
Section 1
3. Agenda for growth
Clear roadmap for the future of EMU
Balance between growth and austerity:reforms in exchange for a strategy focused on growth
Short-term objectives: avoiding the risk of an austerity-recession downward spiral and clearing up the uncertainty over the solvency of
sovereign debt
Gradual fiscal adjustment with multi-year plansFocus on structural deficits as called for in the Treaty
An agenda for growth that is compatible with fiscal adjustment
Consumption Outlook, 29 May 2012
Page 9
Section 1
4. Greater progress towards fiscal union
From the Stability Treaty...
Despite difficulties in estimating the volume, this places the right emphasis on structural
adjustment...
...but also raises doubts about how and when to apply the "extraordinary circumstances" clause
Not ambitious enough to elicit an assertive move from the ECB hardliners and Germany?
...to fiscal union
Eurobonds: a good mechanism for mutualising risk
The "blue" and "red" bond proposalmaintains a degree of market discipline
A union with temporary (rather than permanent) transfers would be sufficient
Consumption Outlook, 29 May 2012
Page 10
Banking system: Euro-zone sovereign bondholdings (% of assets)Source: BBVA Research based on ECB data
Indirect ECB intervention in the sovereign bond market via banks
Increased bank exposure to sovereign debt heightens the potential negative for feedback
between the two
Emphasises the need for a definitive solution to the doubts about sovereign solvency
Objective: to eliminate interaction of sovereign risk and bank risk
4,0
4,5
5,0
5,5
6,0
6,5
7,0
7,5
8,0
Jan
-10
Mar
-10
May
-10
Jul 1
0
Sep
-10
No
v-10
Jan
-11
Mar
-11
May
-11
Jul-1
1
Sep
-11
No
v-11
Jan
-12
Mar
-12
Spain Italy
Section 1
5. Greater financial integration
Consumption Outlook, 29 May 2012
Page 11
Section 1
International environment: continued global growth and persistent risks in Europe
Section 2
Spain: recession confirmed, although it is not worsening. Ongoing reforms will increase growth
Section 3
Consumption: Weaker drivers point to declining consumption in 2012 and the first half of 2013
Section 4
Demand for durable goods: is there any?
Contents
Consumption Outlook, 29 May 2012
Page 12
Section 2
Main changes in the economic scenario in 2012
Main drivers of the macroeconomic scenarioSource: BBVA Research
New
fact
ors
Growth forecast 3 months ago
2012 growth forecast still intact, but uncertainty increases -1.3%
3. Increased financial stress
4. Unprecedented fiscal adjustment due to the deviation in 2011
5. LEP and the Supplier Payment Plan
6. Labour market reform and financial reform
-1.3%
1. 1Q and 2Q confirm the scenario
2. Rising oil prices
Consumption Outlook, 29 May 2012
Page 13
Section 2
1. Available data confirm the scenario
Spain: real GDP growth and forecasts based on MICA-BBVA model (%, qoq)Current forecast: 25 MaySource: BBVA Research The Spanish economy entered a technical
recession in 1Q12...
Employment continues to be hindered by the negative outlook for growth
Published data indicate that 2Q12 growth is likely to have remained negative
...although the rate of slowdown did not worsen in comparison with 4Q11
-1.5
-1 .0
-0.5
0.0
0.5
1.0
1 .5
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2Q0
9
3Q0
9
4Q
09
2Q10
3Q10
4Q
10
1Q11
3Q11
4Q
11
1Q12
2Q12
CI at 20%
MICA-BBVA point estimation (55% of data for 2Q12)
Actual (BBVA Research official forecast for 2Q12)
2Q11
1Q10
CI at 40% CI at 60%
Consumption Outlook, 29 May 2012
Page 14
Section 2
2. Hike in oil prices
Spain: impact of recent oil price recovery on business activity and prices (deviation from previous scenario)Source: BBVA Research
Rise in oil prices result of both supply-side and demand-side factors
No contractive reaction expected in monetary policy
Will have a temporary effect on long-term trends
Negative, but limited, impact
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
2012 2013 2012 2013
GDP (% yoy) CPI (% yoy)
Supply Precautionary demand Global demand Total
Consumption Outlook, 29 May 2012
Page 15
Section 2
3. Increased financial stress
Spain: balance of payments and capital flows (Cumulative 12-month, % of GDP)Source: BBVA Research based on Bank of Spain data
FDI and other capital flows entering the country were financing the current account deficit
before the onset of the financial crisis
Starting in 2007, other capital inflows (bonds, loans, etc.) turned highly volatile...
... which makes the economy dependent on flows through the Eurosystem
It is liquidity, not solvency
In light of the lack of liquidity, the main risk lies in self-fulfilling expectations
-15
-10
-5
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10
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Dec
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r-0
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g-0
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r-0
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g-0
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r-0
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-07
Au
g-0
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Ap
r-0
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-09
Au
g-1
0
Ap
r-11
Dec
-11
FDI Other Eurosystem Current account
Consumption Outlook, 29 May 2012
Page 16
Section 2
4. Unprecedented fiscal adjustment due to the deviation in 2011
Spain: adjustment in Public Administration deficits (% of GDP)Source: BBVA Research
Fiscal adjustment measures equivalent to 5.1% of GDP are required in to reach the -5.3% target
for 2012
The 2012-2015 Stability and Growth Programme contains measures that make meeting of the central government target perfectly feasible...
... with the focus very much on the Autonomous Communities
Additional manoeuvring room: as-yet-unspecified measures of the Autonomous
Communities, or privatisations
3.6
2.3
0.4
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
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5.0
6.0
2011 (Deficit: 8.9%) 2012 (Target: -5.3%) 2013 (Target: -3.0%)
Cycle-adjusted Cyclical deterioration
Discretionary measures Structural deterioration Total
Consumption Outlook, 29 May 2012
Page 17
The impact on 2012 GDP of the Government's programme to settle administrations' unpaid supplier invoices* (pp of GDP)
* Max and Min depend on agents' level of liquidity restrictionSource: BBVA Research based on MINHAP data
Important liquidity injection
Section 2
5. Supplier payment programme
The Government is to inject the equivalent of 2.5% of GDP (€27bn) to pay off local and
regional governments' debts with suppliers
The impact on growth could be significant, given that these companies are currently
experiencing liquidity restrictions
The final impact will depend to a large extent on current uncertainty
0.0
0.1
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0.7
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0.9
1.0
20% 33% 50%
Percentage of debts discounted
Consumption Outlook, 29 May 2012
Page 18
Spain: response to labour reform (% deviation from trend)Source: BBVA Research
The challenge: from adjustment to growth
Short-term objective: to prevent further job losses→ change in working hours + labour flexibility and better-organised production
To stimulate growth where it is weak and to take advantage of it in more buoyant sectors
A redistribution of production drivers towards the more dynamic companies and sectors
(export sector)
To eliminate barriers to internal growth via a more favourable regulatory framework
Section 2
6. Labour Reform
-2
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4
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2013
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GDP Employment
Consumption Outlook, 29 May 2012
Page 19
29% 29% 29%18% 18% 18%
14% 14%
7%
30%
17%27%
10% 10%
0%
10%
20%
30%
40%
50%
60%
Dis
tres
sed,
Dec
-11
Dis
tres
sed,
Feb
-12
Dis
tres
sed,
May
-12
Non
-dis
tres
sed,
Dec
.-11
Non
-dis
tres
sed,
Feb
-12
Non
-dis
tres
sed,
May
-12
Tota
l, D
ec.-1
1
Tota
l, Fe
b -12
Tota
l, M
ay-1
2
Current coverage Additional provisions Capital cushion
Exposure: €123bn Exposure: €307bnExposure: €184bn
Real-estate assets: additional provisions and capital cushionSource: BBVA Research based on MEC data
The new measures represent a step forward
More realistic assumptions in real-estate valuations and larger writedowns
The impact of the new requirements on shaping the sector will depend on how they are
applied
Taking prompt action in insolvent institutions and making the cost clear
Section 2
6. Financial-System Reform
Consumption Outlook, 29 May 2012
Page 20
Section 1
International environment: continued global growth and persistent risks in Europe
Section 2
Spain: recession confirmed, although it is not worsening. Ongoing reforms will increase growth
Section 3
Consumption: weaker drivers point to declining consumption in 2012 and the first half of 2013
Section 4
Demand for durable goods: is there any?
Contents
Consumption Outlook, 29 May 2012
Page 21
Key drivers of consumption
Disposable income 1. Job destruction and wage
moderation2. Public sector deleveraging
Propensity to save / consume
3. Uncertainty4. Liquidity pressure and
return on savings
Section 3
Household consumption
Possibility of borrowing 5. Private sector
deleveraging
Spain: private consumption (%)Source: BBVA Research based on INE data
-5
-4
-3
-2
-1
0
1
2008 2009 2010 2011 2012 2013
Private consumption GDP
Consumption Outlook, 29 May 2012
Page 22
Spain: employment and unemployment rates (%)Source: BBVA Research based on INE data
Job destruction and wage moderation
Section 3
Household consumption
The economic slowdown has caused greater job destruction
Labour-market reform might facilitate a rebalancing adjusting the extensive margin
(employment) and the intensive margin (hours and wages) and reduce segmentation…
… but will not prevent the number of employed from continuing to decline in the short term
1
8
11
14
17
20
23
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-8
-6
-4
-2
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2
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-08
Jun
-08
Se
p-0
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De
c-0
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-09
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-09
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p-0
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De
c-0
9
Mar
-10
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-10
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p-1
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De
c-10
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-11
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-11
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p-1
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De
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-12
20
12
20
13
Employment Unemployment rate (rhs.)
Consumption Outlook, 29 May 2012
Page 23
Spain: gross disposable household income (%)Source: BBVA Research based on INE data
Public sector deleveraging
Section 3
Household consumption
Spain: effect of higher tax rates on GDP(Permanent increase, equivalent to 1% of GDP collected)Source: BBVA Research. REMS simulations, effect after two years.
0.0Consumption
Personal income tax
Social Security
Share capital
-0.2
-0.4
-0.6
-0.8
-1.0
-1.2
-1.4
-0.75
-0.84
-1.0
-1.22
Deterioration of labour market + fiscal consolidation
Declining disposable income over the entire forecast period
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-8
-6
-4
-2
0
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4
6
8
10
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-08
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-08
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-08
Dec
-08
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-11
2012
2013
Nominal Real
Consumption Outlook, 29 May 2012
Page 24
Spain: impact of decrease in confidence on growth in consumer spending*(%)Source: BBVA Research based on INE data
Increased uncertainty
Section 3
Household consumption
Spain: household consumption, GDP and confidence indicator (t-1) (%)Source: BBVA Research based on INE and EC data
Uncertainty is expected to remain high Purchases are being postponed
3
-6
-4
-2
0
2
4
6
8
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-11
-50
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-36
-29
-22
-15
-8
-1
6
Consumption (%, yoy, lhs.) GDP (%, yoy, lhs.)
Household financial situation, next 12-month (t-1, rhs.)
-0.3-0.3
-0.2
-0.1
0.0 0.0
-0.40
-0.30
-0.20
-0.10
0.00
0.10
1st year 2nd yerar 3rd year
-5.1 points, permanent -5.1 points, temporary
*Confidence indicator used is households’ perception of their future economic situation
Consumption Outlook, 29 May 2012
Page 25
Spain: promissory notes and deposits by non-financial corporates and households (% yoy)Source: Bank of Spain
Liquidity pressures and return on savings
Section 3
Household consumption
Spread between rates offered on term deposits and 12m Euribor (pp)Source: BBVA Research based on INE and ECB data
Liquidity pressures
Encourages savings to the detriment of consumption
Higher remuneration from private-party liabilities
(first deposits and, later, promissory notes)
4
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
Mar
-07
Sep
-07
Mar
-08
Sep
-08
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-09
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-10
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Spain Germany
-3
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-1
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1
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-11
Mar
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May
-11
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Sep
-11
No
v-11
Jan
-12
Deposits (non-financial corporates + households) and promissory notesDeposits (non-financial corporates + households)
Consumption Outlook, 29 May 2012
Page 26
Consumer credit (% GDP)(*) Including securitisationsSource: BBVA Research based on INE, Bank of Spain and European Commission data
Private sector deleveraging (l)
Section 3
Household consumption
Household credit* (% GDP)(*) Consumer and other + housing, including securitisationsSource: BBVA Research based on INE, Bank of Spain and European Commission data
Household credit: far from converging with the EMU (24 GDP points) Consumer credit: deleveraging well underway
5
0%
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100%
200
0
200
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200
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200
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200
9
2010
2011
Mar
-12
Spain* EMU Ireland
32pp 24pp
0%
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4%
6%
8%
10%
12%
14%
16%
200
0
200
1
200
2
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8
200
9
2010
2011
Mar
-12
Spain* EMU Ireland
3.4pp
-0.2pp
Consumption Outlook, 29 May 2012
Page 27
Private sector deleveraging (lI)
Section 3
Household consumption
Spain: response of consumption to a negative stimulus from lending, by type of shock(Deviation in annual growth from core scenario, pp)The stimulus has tapered off at 1 pp of credit in the first quarter of the year.Source: BBVA Research
… Deeper and longer-lasting if it results from lower demand for credit
Will continue to have a considerable impact on consumption ...
The deleveraging process will be long
5
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
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Quarters
Credit demand Credit supply
Consumption Outlook, 29 May 2012
Page 28
Section 3
Household consumption
BBVA Business Trend Survey: perception of credit supply and demandBalance of answers: (<0 indicates a worsening)Source: BBVA Research
Supply and demand for credit have fallen (more
than expected) over the last quarter:
• Slack consumption and weak fundamentals have affected demand for credit, with a higher rate of contraction in 1H12
• Slight relaxation of lending conditions, although insufficient to avoid a contraction in supply
Results of BBVA BTS
Outlook for 2H12: somewhat more favourable from the standpoint of supply of than demand
for credit
Private sector deleveraging (lII)5
-90
-75
-60
-45
-30
-15
0
15
2H10 1H11 2H11 1H12 Outlook 2H12
Supply Demand
Consumption Outlook, 29 May 2012
Page 29
Section 3
Household consumption
Spain: contributions to yoy growth in consumer credit (%)Source: BBVA Research
∇ 1% in consumer spending → ∇ 1.4% in demand for consumer credit in the long term (ceteris paribus)
+100bp in interest rates on loans → ∇ 3.6% in demand for consumer credit
+1pp in unemployment rates → ∇ 4.6% in demand for consumer credit
Worsening expectations of households –reflected in rising unemployment rate- account for about 80% of the decline in consumer credit
during the current crisis
What are the reasons for the slowdown in demand?
Private sector deleveraging (lV)5
-24%-20%-16%-12%-8%-4%0%4%8%
12%16%
20%
Mar
-02
Dec
-02
Sep
-03
Jun
-04
Mar
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Dec
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Sep
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Jun
-07
Mar
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Dec
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Sep
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Jun
-10
Mar
-11
Dec
-11
Private Consumption Real rates Unemployment
Other Plan 2000E Consumer Credit
Consumption Outlook, 29 May 2012
Page 30
Section 3
Household consumption
Spain: interest rates on new consumer loans (%)Through May 10, one-year interest rate and the weighted average rate include credit card transactionsSource: BBVA Research based on Bank of Spain data
Spain: household default rate (%)Source: BBVA Research based on Bank of Spain data
Lingering financial pressures + expectation of weak demand + continued high default rates do not point to a recovery in consumer credit in the short term
Private sector deleveraging (V)5
0
2
4
6
8
10
12
14
Jan
-08
Ap
r-0
8
Jul-0
8
Oct
-08
Jan
-09
Ap
r-0
9
Jul-0
9
Oct
-09
Jan
-10
Ap
r-10
Jul-1
0
Oct
-10
Jan
-11
Ap
r-11
Jul-1
1
Oct
-11
Jan
-12
Weighted average rate Up to 1 year
More than 1 year and up to 5 years More than 5 years
0%
1%
2%
3%
4%
5%
6%
7%
8%
Mar
-08
Jun
-08
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Dec
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Home purchases and improvements Durable consumer goods
Other household financing Total households
Consumption Outlook, 29 May 2012
Page 31
Section 3
Household consumption
Spain: financial burden of households, official rates and core inflation (%)Source: BBVA Research based on INE, ECB and Eurostat data
Fragile economic situation + lack of demand-side inflation pressures will keep interest rates at
historical lows …
… reducing the financial burden of households and making resources available for
consumption
Private sector deleveraging (VI)5
0%
4%
8%
12%
16%
20%
Mar
-08
Jun
-08
Sep
-08
Dec
-08
Mar
-09
Jun
-09
Sep
-09
Dec
-09
Mar
-10
Jun
-10
Sep
-10
Dec
-10
Mar
-11
Jun
-11
Sep
-11
Dec
-11
Mar
-12
Dec
-12
Dec
-13
0%
1%
2%
3%
4%
5%
Financial burden (% GDHI, lhs.)Official interest rate (%, rhs.)EMU core inflation (rhs.)
Consumption Outlook, 29 May 2012
Page 32
Section 1
International environment and the Spanish economy: once again in recession and coping with the challenge of preventing massive job destruction
Section 2
Spain: recession confirmed, although it is not worsening. Ongoing reforms will increase growth
Section 3
Consumption: weaker drivers point to declining consumption in 2012 and the first half of 2013
Section 4
Demand for durable goods: is there any?
Contents
Consumption Outlook, 29 May 2012
Page 33
Section 4
Demand for durable goods
Spain: perception of purchase timing(Difference of percentages between positive and negative responses, MM3)Source: BBVA Research, based on Millward Brown data
Spain: consumer goods availability(SWDA data, quarterly averages, Jan-08 = 100)Source: BBVA Research based on MEC data
Domestic demand for durables remains weak … Did it hit bottom in 2011?
0
20
40
60
80
100
Mar
-08
Jun
-08
Sep
-08
Dec
-08
Mar
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Jun
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Sep
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Dec
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Mar
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Jun
-10
Sep
-10
Dec
-10
Mar
-11
Jun
-11
Sep
-11
Dec
-11
Mar
-12
Consumer goods Food productsDurables Other non-durable
-75
-60
-45
-30
-15
0
15
Mar
-09
May
-09
Jul-0
9
Sep
-09
No
v-0
9
Jan
-10
Mar
-10
May
-10
Jul-1
0
Sep
-10
No
v-10
Jan
-11
Mar
-11
May
-11
Jul-1
1
Sep
-11
No
v-11
Jan
-12
Mar
-12
Small appliances Music equipment or TVsLarge appliances ComputersMobile devices FurnitureCars Average
Consumption Outlook, 29 May 2012
Page 34
Section 4
Demand for durable goods
Spain: real exports of goods(SWDA data; 1Q09 = 100)Source: BBVA Research based on MEC data
Unlike in 1H11, foreign demand for durable goods has not offset sluggish domestic demand in 4Q11
and 1Q12
Consumer electronics, furniture and automobiles: better relative performance
Two-wheeled vehicles and electrical appliances: higher-than-average decline
40
60
80
100
120
140
160
180
Mar
-09
Jun
-09
Sep
-09
Dec
-09
Mar
-10
Jun
-10
Sep
-10
Dec
-10
Mar
-11
Jun
-11
Sep
-11
Dec
-11
Mar
-12
Total goods AppliancesConsumer electronics Computer equipmentCars Motorcycles and mopedsFurniture Durables (*)
Consumption Outlook, 29 May 2012
Page 35
Section 4
Demand for durable goods
Spain: car registrations(SWDA data)Source: BBVA Research based on ANFAC and Ganvam data
Spain: car registrations by sales channel (contribution to % yoy)Source: BBVA Research based on ANFAC and Ganvam data
NCs rose in 1Q12 (+5.5% qoq SWDA) against a backdrop of falling prices …
… but then plummeted again in April: -14.7% mom
Cars: changing composition of sales by channel …a
Rental companies are primarily responsible for recent fluctuations in sales (fleet renewals)
-40
-30
-20
-10
0
10
20
30
Jan
-09
Ap
r-0
9
Jul-0
9
Oct
-09
Jan
-10
Ap
r-10
Jul-1
0
Oct
-10
Jan
-11
Ap
r-11
Jul-1
1
Oct
-11
Jan
-12
Ap
r-12
-80
-60
-40
-20
0
20
40
60
% mom % qoq % yoy (rhs.)
Plan 2000E -60
-40
-20
0
20
40
60
80
Jun
-09
Au
g-0
9
Oct
-09
Dec
-09
Feb
-10
Ap
r-10
Jun
-10
Au
g-1
0
Oct
-10
Dec
-10
Feb
-11
Ap
r-11
Jun
-11
Au
g-1
1
Oct
-11
Dec
-11
Feb
-12
Ap
r-12
20
30
40
50
60
70
80
90
Private Corporate Rental agenciesTotal Weight of private channel (rhs.)
Plan 2000E
Consumption Outlook, 29 May 2012
Page 36
Spain: Used vs. new carsSource: BBVA Research based on ANFAC, IEA and Ganvam data
Section 4
Demand for durable goodsCars: … and by tpea
Demand for used vehicles continued to rise: 3.4% en 2011 (57.7% between private parties)
Slight correction in 1C12: -3.7% yoy
used/new = 2.1 in 2011 (2.0 in 1C12) …
… In line with Germany (1.8), Italy (2.1) or France (2.3)
0
250
500
750
1000
1250
1500
1750
2000
2008 2009 2010 2011 Jan-Apr 2011
Jan-Apr 2012
Th
ou
san
ds
of c
ars
1.0
1.2
1.3
1.5
1.6
1.8
1.9
2.1
2.2
Used car sales New car registrations Used/New (rhs.)
Consumption Outlook, 29 May 2012
Page 37
Section 4
Demand for durable goods
Spain: breakdown of all cars by age (% of total)Source: BBVA Research, using DGT data
Cars more than 10 years old (% of total)Source: BBVA Research based on ANFAC, IEA, ACEA and OICA
The breakdown of cars has shifted to the right
Cars: an ageing fleet… along with the rest of Europea
Convergence with Europe against this backdrop of overall ageing of the vehicle fleet
0%
2%
4%
6%
8%
10%
12%
14%
+ o
f 2020191817161514131211109876543210
Age of cars
Dec-11 Dec-06
-12.5pp
+9.6pp
+2.0pp
0
10
20
30
40
50
60
UK
Bel
giu
m
Fran
ce
Ger
man
y
Spai
n (2
010
)
Spai
n (2
011
)
Au
stri
a
Ital
y
Net
her
lan
ds
Den
mar
k
Swed
en
Po
rtu
gal
Gre
ece
Fin
lan
d
0
2
4
6
8
10
12
Cars more than 10 years old, % (2010)Average for selected countriesIncrease 2005-10, pp. (rhs.)
Consumption Outlook, 29 May 2012
Page 38
Section 4
Demand for durable goodsCars: outlooka
Spain: car registrations(Annual total and % change)Source: BBVA Research and ANFAC
Drivers of car registrations: complex scenario Some 750 thousand cars in 2012 and 800 thousand in 2013
Spain: forecasts for drivers of car registrationsSource: BBVA Research based on INE, MEC and Bank of Spain data
-20
-15
-10
-5
0
5
10
15
20
2008 2009 2010 2011 2012 2013-8
-6
-4
-2
0
2
4
6
8
Real GDP pc (% lhs.)Relative price of fuel (% lhs.)Change in unemployment rate (pp. rhs.)Change in average interest rate on new consumer credit op. (pp., rhs.)
0
300
600
900
1200
2008 2009 2010 2011 2012 2013
Th
ou
san
do
fcar
s
-30
-20
-10
0
10
%yo
y
Actual Forecast
Actual % yoy (rhs.) Forecast % yoy (rhs.)
Consumption Outlook, 29 May 2012
Page 39
Section 4
Demand for durable goodsTwo-wheeled vehicles: going downhillb
Spain: registrations of mopeds and motorcycles (SWDA data, % qoq)Source: BBVA Research based on Anesdor and Bank of Spain data
Deterioration of drivers (disposable income, unemployment—especially among young
people—and risk aversion)
Regulatory changes: increase in the licence age for mopeds to 15 and the transposition of
Directive 2006/126/CE almost four years ahead of European requirements
What are the reason for lower demand?
In 2012 some 100 thousand mopeds might be registered (125 thousand in 2011)
-50
-40
-30
-20
-10
0
10
20
30
Mar
-08
Jun
-08
Sep
-08
Dec
-08
Mar
-09
Jun
-09
Sep
-09
Dec
-09
Mar
-10
Jun
-10
Sep
-10
Dec
-10
Mar
-11
Jun
-11
Sep
-11
Dec
-11
Mar
-12 -5
-4
-3
-2
-1
0
1
2
3
Registrations Total cars (rhs)
Plan Moto-E
Consumption Outlook, 29 May 2012
Page 40
Section 4
Demand for durable goodsFurniture: drop in line with the average decline for durablesc
Spain: furniture sector turnover(SWDA data, % qoq)Source: BBVA Research based on INE data
Downside exports: -18.6% SWDA between 4Q11 and 1Q12
Perennial deterioration in investment in housing:
-10.1% SWDA between 4Q11 and 1Q12
Two underlying reasons:
BBVA Research estimates:• ∇ of 1% qoq in nominal furniture exports →∇ approx. 0.7% qoq in turnover
• ∇ of 1% qoq in nominal investment in housing → ∇ decline in turnover 0.6% qoq, cumulative
-20
-15
-10
-5
0
5
10
Mar
-08
Jun
-08
Sep
-08
Dec
-08
Mar
-09
Jun
-09
Sep
-09
Dec
-09
Mar
-10
Jun
-10
Sep
-10
Dec
-10
Mar
-11
Jun
-11
Sep
-11
Dec
-11
Mar
-12
Furniture Durable consumer goods Consumer goods
Consumption Outlook, 29 May 2012
Page 41
Section 4
Demand for durable goodsMajor household appliances: falling consumption, rising post-saled
Spain: sales of appliances by product family(% yoy of units)Source: BBVA Research based on ANFEL data
Spain: consumer prices for household appliances(Jan-08 = 100)Source: BBVA Research based on INE data
Jan-Apr 2012: -12.0% yoy; turnover: -14.9% yoyWashing machines and dishwashers: smaller
relative declineGeneralised fall in prices, except for repair
services (+17.0% since Jan-08)
-40
-30
-20
-10
0
10
20Refrigerators
Freezers
Washing machines
Dryers
DishwashersCookers
Ovens
Counters
Total
2010 2011 Jan-Apr 2011 Jan-Apr 2012
88
96
104
112
120
Jan
-08
Ap
r-0
8
Jul-0
8
Oct
-08
Jan
-09
Ap
r-0
9
Jul-0
9
Oct
-09
Jan
-10
Ap
r-10
Jul-1
0
Oct
-10
Jan
-11
Ab
r-11
Jul-1
1
Oct
-11
Jan
-12
Ap
r-12
Total appliances Refrigerators, washing mach. and dishwashersCookers and ovens Other appliancesAppliance repairs General
Consumption Outlook, 29 May 2012
Page 42
Section 4
Demand for durable goodsBrown line products: a promising half year following a year to forgete
Spain: real retail sales of brown line items (SWDA data, % qoq)Source: BBVA Research based on Eurostat data
Spain: consumer prices forbrown line items (Jan-08=100)Source: BBVA Research based on INE data
4Q11 + 1Q12: consumer electronics -8.5% SWDA; ITC -5.1% SWDA
Eurocup and Olympics: will increase sales in 2Q and 3Q
Persistent deflation (except in telephony) contributes to raise penetration rate
-12
-10
-8
-6
-4
-2
0
2
4
6
8
Mar
-08
Jun
-08
Sep
-08
Dec
-08
Mar
-09
Jun
-09
Sep
-09
Dec
-09
Mar
-10
Jun
-10
Sep
-10
Dec
-10
Mar
-11
Jun
-11
Sep
-11
Dec
-11
Mar
-12
ITC Consumer-electronics Non-food products
40
50
60
70
80
90
100
110
Jan
-08
Ap
r-0
8
Jul-0
8
Oct
-08
Jan
-09
Ap
r-0
9
Jul-0
9
Oct
-09
Jan
-10
Ap
r-10
Jul-1
0
Oct
-10
Jan
-11
Ap
r-11
Jul-1
1
Oct
-11
Jan
-12
Ap
r-12
Telephone equipment Video and sound equipment
General Cameras and movie equipment
Computer equipment
Consumption Outlook, 29 May 2012
Page 43
Key themes
1
2
3
Europe decoupling from the global economy growth while the region continues to await a long-term plan to boost economic activity and allow sovereign risk to be spread in exchange for structural reform and better coordination
Spain's GDP is still expected to contract in 2012 (by 1.3%), before gradually recovering in 2013. However, this outlook now appears less certain
Building up confidence now depends on the design, execution, and communication of a credible set of reforms
Weaker drivers point to declining consumption in 2012 and the first half of 2013, especially for durable goods
Lingering financial stress and high default levels, and, in particular, the expectation of weak demand do not point to an increase in consumer credit in the short term
Worsening expectations by households account for 80% of the fall in demand for consumer credit in the current crisis
4
5
6
Consumption Outlook, 29 May 2012
Page 44
Consumption Outlook
Madrid, 29 May 2012
Consumption Outlook, 29 May 2012
Page 45
Spain: restructuring processes in major appliances and brown products sectors (2009-12)* D: distributing company; M: manufacturing companyShaded cells: changes since publication of last Economic Outlook. ConsumptionSource: BBVA Research based on Alimarket and European Monitoring Centre on Change data
Appendix
Appendix 1
Company Type of company* Type of restructuring
PC City D (-) Store closure and workforce reduction
Darty D (-) Store closure
Miró D (-) Store closure and workforce reduction
Unecsa D (-) Voluntary bankruptcy
Urende D (-) Store closure and workforce reduction
Urende D(-) Approval of closing of stores and worforce reduction
Unecsa D (-) Closing of storesFibertel D (-) Voluntary bankruptcyMedia Markt D (+) Opening of storesEcomputer D (+) Opening of stores
Worten D(+) Opening of stores (+ partial absorption PC City)
Fnac D (+) Opening of storesFnac D (+) Opening of storesWorten D (+) Opening of storesApple D (+) Opening of storesElectro merkat D (+) Opening of storesTristar Spain D
(+) MergerTopcom Iberia D
Company Type of company* Type of restructuringInfinity System F,D (-) Temporary workforce reductionSanyo F (-) Plant closureElectronic Devices Manufacturer
F (-) Liquidation
Engel Axil F (-) Voluntary bankruptcy
BSH F (-) Workforce reduction
Sharp F (-) Temporary workforce reduction
Daewoo F(-) Workforce reduction following extinction of company
Daewoo F (-) Sale of plantDi4 F (-) Voluntary bankruptcyRimax innovation F,D (-) Liquidation
NPG F (+) Expansion
Conceptronic F(+) MergerDigital Data
CommunicationsF
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