MortgagesPlunge 42% fromYearAgoinSpain, 38th ConsecutiveDrop; SignsofRecovery? SpainNeedAnotherBailout?
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Prime Minister Mariano Rajoy wants you to believe the Spanish economy is improving. One look at housing suggests any improvement is an illusion.

Here are some highlights from a translation of the La Vanguardia article Mortgagesplummet 42.2% inJune

The number of mortgages for home purchase in June fell 42.2% compared to June of 2012 Mortgages declined every month for 38 months. June signed just 14,053 home mortgages, the lowest monthly figure of the last ten years. The six-month total from January to June 2013 was 115,895 signed mortgages. That is less than the one-month total for May of 2007 which had 118,669 signed mortgages. The average value of mortgages dropped, down 9% from a year ago to 97,495 euros. This was the worst half-year since the data series for this indicator began, in 2003.

SignsofRecovery

The Telegraph says More paininSpainbutsignsofrecovery.

The latest government figures show that in June Spain’s exports surged 10.5pc from a year earlier, a boom that nearly wiped out the nation’s trade deficit. Spain’s trade deficit was €106m in June, a steep drop from the €2.7bn deficit registered a year earlier and a figure heralded by the conservative government of Mariano Rajoy as a long period of recession was finally coming to a close.

Last month Spain’s national statistics agency reported that GDP had decreased by only 0.1pc in the second quarter of 2013 compared to the first, which saw a bigger decline of 0.5pc. That and a drop in unemployment figures, largely considered to be a result of seasonal hiring in the tourism industry, are the first signs of the "light at the end of the tunnel" that the government has been promising since initiating a series of deeply unpopular austerity measures.

Ministers and officials have been keen to hammer home the message that the worst of the crisis has passed. "Our economy has turned the corner and we are at the start of a change in trends which will allow us, with effort, to create jobs again. The foundations have been laid," Rajoy said at an event in July, shortly before leaving Madrid for his summer holidays. Luis de Guindos, Spain’s Economic Minister meanwhile was quick to point out that "the recession has come to an end".

Foundations? What Foundations?

I would like to ask Rajoy "precisely what foundations have been laid?"

Is the banking crisis over? Is Spain out of the Eurozone? Was there pension reform? Work rule reform? Have banks written off all bad property loans? Are Spanish banks recapitalized.

The answer to each of those question is "No".

Spain Need Another Bailout?

Here is a bonus question "Does Spain need another bailout?"

The answer to that question is "yes".

The Telegraph continues …

"It’s no secret that domestic demand remains very weak because spending is massively impaired by unemployment and austerity," Gilles Moec, analyst at Deutsche Bank, said in a recent report. "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."

But perhaps the biggest single factor hampering Spain’s recovery is the crippling unemployment which, at almost 27pc, is more than twice the European average. Almost 6m out of 47m Spaniards are without a job – or a quarter of the workforce – and many labour market economists believe that those numbers are unlikely to change dramatically even once Spain returns to growth.

The average Joe on the Street knows Rajoy is a liar.

Spaniards on the street scoff at proclamations of an end to the crisis. "Until the time comes when I don’t need to worry how I am going to pay my mortgage and feed my family, then I won’t believe what this government says about the crisis being over," said Mercedes Rivas, a 39-year-old supermarket worker from Madrid. She is the sole bread winner in a family of five, after her husband lost his job in construction four years ago, and earns just €800 a month.

End of Recession? When?

Spain’s Economic Minister says "the recession has come to an end".

The IMF does not think Spain will return to growth until 2015, and even then only 0.3%. And the IMF has been overly-optimistic every step of the way. Nonetheless, let’s assume the IMF finally has things correct and Spain grows 0.3% in 2015.

Is that a "recovery" or stagnation at the bottom with a 25% unemployment rate on top of it all.

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

Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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