According to the Bank of Spain and as reported by Libre Mercado, Spain’s GDP Drops at 2% Annualized Rate in First Quarter

The Spanish economy fell 0.5% in the first quarter and declined 2% year on year, according to economic bulletin of the Bank of Spain , which estimates a fall of 4.5% of employment in the same period, two tenths less than in the previous quarter.

The monetary authority notes that Spain continued the “contraction pattern” of activity in the first quarter, although at a “more muted” than in the final last year, where the GDP contracted by 0.8 % quarterly rate. However, he warns that this improvement could “have dimmed” in the latter part of the quarter, under “decreasing profile” of some indicators.

The Bank of Spain estimates that domestic demand fell by 0.8%, also lower than in the previous quarter, to reverse the impact of temporary factors that had a negative impact on domestic spending in the final months of 2012, as raising indirect taxes and the abolition of the bonus for public employees.

However, the central bank indicated that the reduced capacity of household savings, the fall of his wealth, the persistence of job outlook “uncertain” and a high debt leaves little room for recovery of short-term consumption. For residential investment, it also highlights that demand continues to show “great weakness”.

Thus, private consumption fell by 0.3%, against a fall of 2% in the previous quarter, while gross capital formation contracted by 1.8%, also well below the 3.9% decline previous quarter.

Don’t Cheer Yet

Spain is contracting less than last quarter, and although unemployment is still rising, it’s also at a less pace than last year. Is this something to cheer about?

Not really. Spain’s budget deficit targets missed by a mile, and had they been closer, everything else would have been worse.

Moreover, while things are getting worse at a decreasing rate in Spain, it’s important to note that things are getting much worse at an increasing pace in Germany. For details, please see Germany Private Sector Output Declines First Time Since November; Eurozone Activity Declines 19th Time in 20 Months.

There is very little to cheer about in the eurozone.

Mike “Mish” Shedlock