The world is digesting the release of quarterly economic data as we start to learn the cost of the COVID measures. Spanish GDP saw a collapse of 18.5% on top of the 5.2% decline in he first quarter January to March. This two consecutive quarters in the red confirm what is not a surprise to anyone, that Spain is now in recession.
The drop is larger than anything ever seen or understood n modern economics. The data gets worse though. In the second quarter USA GDP dropped 9.5%, Germany 10.1%, Belgium 12.2% Italy 12.4% and France 13.8%. The overall Euro zone decline was 12.1%.
Experts are reaching for understanding for the differences in figures. In Spain the drop is being attributed to the combination of the aggressive lockdown measures combined with the dependency of the Spanish economy on the movement of people, especially international and domestic tourism.
The collapse is difficult to put into perspective. In the modern era of data collection, starting in 1970, the largest previous quarterly decline in GDP was in the first quarter in 2009 post the 2008 crisis where GDP fell by 2.6%. Previous eras of economic catastrophe are still put into the shade by these latest figures. In 1936 the annual decline was 26.8% which equates to 6.7% quarterly decline.
Bert Colijn, Senior economist for the eurozone at ING investment bank has spoken in stark terms about trying to understand these record figures:
"Some records are never to be beaten. Think of Alan Shearer’s Premier League goals, Wilt Chamberlain’s 100 point basketball game, Eddy Merckx’s victories in cycling. The second quarter eurozone GDP figure should probably go on that list as well; it would be great if it were never to be beaten.
The -12.1% quarter-on-quarter growth rate is the worst ever recorded and a pretty difficult one to interpret. It is a shocking drop, but completely understandable as the economy was shut for a considerable period during the quarter. It, therefore, doesn’t tell us all that much about the general state of the economy, which is usually why one would look at GDP figures in the first place. Still, the deeper the lockdown, the higher the chance of more significant lasting damage to the economy and therefore the extent of the decline is still relevant."
Within the figures are once again, statistics which reflect what we have already experienced. Household spending is down 21.2%, exports down 33.5% and imports down 28.8%. If these types of figures were to last for the year, national production would fall a terrifying 70%.
As restrictions start to ease there are indications of retail and card payments rebounding rapidly toward pre COVID levels. This needs to be tempered with the understanding that we have had a period of restricted spending and could also reflect a move away from cash payments to card transactions.
Spanish state broadcaster, TVE, did not cover themselves in glory as they attempted some embarrassingly transparent spin on the story today. Presenting the comparative graphs in such a way as to try to disguise the devastating fact that Spain has suffered the worst quarter in Europe. The record breaker of record breakers. The post is even labelled "Comparison of the historic falls in GDP..."
Perception is reality as they say.