The Bank of Spain considers that the crisis is over … for companies. And is that the results presented yesterday to the CBSO (a study that collects data from 799 nonfinancial companies in the first three quarters of 2014) show improved activity and corporate profits of 62.4% through September this year. An increase favored by the increase in exports, the positive trend in sales inside thanks to the rise in consumption and contribution in stabilizing the labor costs of wage moderation. With these data, the general director of Studies of the supervisory body, José Luis Malo de Molina, do not hesitate to say that “the business sector has outpaced the time of crisis.” However, he also added that the crisis can not be terminated at the level of employment nor in regard to income per capita (8% lower in 2014 compared to 2008), neither of GDP (still 6% lower in 2008). In any case it is the first time that the Bank of Spain speaks of the end of the crisis, even partially.
And, as explained Malo de Molina, from a technical standpoint is “obvious” that the recession is over and the data show that recovery was consolidated during this year. “The improving trend is clearly anchored in 2014 and a pattern of recovery is established, an entry in value added growth companies and an increase in corporate profits,” he said. Malo de Molina explained that corporate profits to September grew significantly (62.4%) because they are coming from very low levels. But also occurred thanks to gains on sales of assets, ie, by extraordinary income. Thus, the activity rate rose from 3.1% back in 2013 to a positive sign of 0.2% in the first nine months of 2014. By sector, the generalized contractions recorded in 2012 and 2013 contrast with developments in all areas of activity in 2014, except in information and telecommunications.
However, this improvement in activity does not correspond to an increase in employment. And is that the templates were down 2.3% in 2013 and continued to do so until September 2014 by 0.5%. In this sense, Malo de Molina explained that this negative percentage is due to the overrepresentation of large companies in the survey, as these companies are still immersed in plans settings. “The trend of net job creation that is occurring in SMEs is not reflected,” said the CEO. However, the data presented in the CBSO show that in the first nine months of temporary employment grew by 3.2% and the fixed continued to decline by 1.2%.
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Meanwhile, staff costs, which had contracted by 2.1% in 2013, slightly increased by 0, 4% until September 2014 due to reductions in staff and a modest increase in the salaries of employees. In this regard, the Director of Studies of the Bank of Spain stressed the usefulness of wage moderation to “gain competitiveness in companies’ and ‘create jobs’. In fact, he regretted that this measure will be held “too late” when the crisis had already hit many companies. However, he also expressed the view that as the economy improves there are “more likely to increase wages in sectors with higher productivity and dynamism” as long as it does not affect competitiveness. A statement that is gaining strength among experts and is a novelty in the discourse of the Bank of Spain, which had hitherto preferred position on this debate.
Less debt
In addition, the study also reflects a 1% reduction in financial expenses as a result of lower interest expense and reduced levels corporate debt, which offers a ‘clear’ downward trend, especially among the most leveraged firms.
Moreover, Malo de Molina recognized that the greatest risks to the Spanish economy from abroad. “The main concern is a scenario of economic weakness in the euro area linked to low inflation,” said the head of the Bank of Spain. In his view, this situation would hurt exports and threaten the expected growth of 2% of GDP by 2015. In this sense, justified the “exceptional” measures taken by the ECB to avoid that dreaded scenario materializes.
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