Madrid: Spain's scars from the slump that overshadowed Prime Minister Mariano Rajoy's first year in office will emerge this week as data shows the toll on economic output that may have kept as many as 6 million people out of work.
Spanish trade figures which was due yesterday will be followed by house-price data today showing if the property market endured a fourth year of declines. The Bank of Spain may also release its estimate for fourth-quarter gross domestic product, and the data will culminate in jobs figures on January 24, forecast by economists to show a record 26 per cent of Spaniards unemployed.
Officials predict the euro-area's fourth-biggest economy faces a further slump this year at a time when the government will struggle to meet its budget goals. Such a backdrop hasn't deterred investors, with the prospect of a European Central Bank (ECB) backstop in the event of a bailout enabling the Treasury to fast-track higher 2013 funding needs, selling €16 billion ($21 billion) at its first three auctions at lower costs.
"Spain may be attractive to buy now, economic fundamentals point in a different direction," said Ricardo Santos, an economist at BNP Paribas SA in London, who sees the rate ending the year at 27.1 per cent. "Spain is in the worst part of its cycle as the harshest part of the fiscal adjustment starts to produce its impact, the social cost will increase as the public sector sheds jobs on top of the private one."
Spanish two-year bonds declined, pushing the yield up one basis points to 2.49 per cent in Madrid. The nation's 10-year bond yield was unchanged at 5.08 per cent, compared to a euro-era record of 7.75 per cent in July. The spread with similar German maturities was 3.5 percentage points.
Unemployment probably rose to 26 per cent of Spain's active workforce in the last quarter, reaching 6 million unemployed, according to a median of 10 estimates in a survey. One-in-three of all jobless in the euro zone are in Spain.
Missed payments as a proportion of total loans at Spanish banks rose to a record 11.38 per cent in November, the Bank of Spain said last week, while purchases of the country's banks' bonds and shares have spurred rallies of 19 per cent this year in Banco Popular Espanol and 16 per cent for CaixaBank. Lending shrank 0.3 per cent in November from October and 5.7 per cent from the same month a year ago.
The default rate on loans to companies rose to 17 per cent in the third quarter, 30 per cent for real estate-linked activities and 3.49 per cent for homeowners. The Bank of Spain is seeking to improve data on evictions due to mortgage defaults after suicides linked to home repossessions provoked public outrage, prompting government measures to limit them.
The economy will contract 1.5 per cent this year after shrinking 1.4 per cent in 2012, according to the median of 26 estimates in a survey. GDP declined between 1.3 per cent and 1.4 per cent last year and will be flat or positive in the second half this year, economy ministry Luis de Guindos said in an interview with La Razon.
The minister said gross domestic product would have fallen between 4 per cent and 5 per cent last year had Spain requested aid from the ECB and the European Union's rescue-fund, the newspaper said.
The Bank of Spain is due to publish this week a first estimate for GDP in the three months through December. Industrial sales fell 4 per cent in November from a year ago while orders fell 1.5 per cent, Spain's national statistics institute INE said last week.
Activity in the services sector was down 7.8 per cent. Since coming to power in December 2011, Rajoy has taken the strictest austerity measures in the nation's three-decade old democratic history to tackle the second-largest budget deficit in the euro area.