spain consumption outlook, 2nd semester 2013
DESCRIPTION
Rebalancing of global growth but not without risk. Higher contribution to growth by developed economies and lower deterioration in emerging markets The Spanish economy has begun to grow moderately, underpinned by exports, and a fiscal adjustment that became better distributed over time Private consumption, especially in the case of durable goods, has shown the first recovery signs following the improvement of its determining factors A favorable pattern in consumer finance has allowed an increase in domestic demand The insufficient adoption of new technologies by companies limits e-commerce growth in Spain The ageing of the Spanish population might have a positive impact on household consumption in the coming decadesTRANSCRIPT
Consumption Outlook Second half 2013
Madrid, December 18, 2013
Consumption Outlook December 18th, 2013
Page 2
Main messages
1
2
3
Rebalancing of global growth but not without risk. Higher contribution to growth by developed economies and lower deterioration in emerging markets
The Spanish economy has begun to grow moderately, underpinned by exports, and a fiscal adjustment that became better distributed over time
Private consumption, especially in the case of durable goods, has shown the
first recovery signs following the improvement of its determining factors
A favorable pattern in consumer finance has allowed an increase in domestic demand
The insufficient adoption of new technologies by companies limits e-commerce growth in Spain
The ageing of the Spanish population might have a positive impact on
household consumption in the coming decades
4
5
6
Consumption Outlook December 18th, 2013
Page 3
Section 1
Rebalancing of global growth: economic strengthening in advanced countries and lower deterioration in emerging markets Section 2
Spain: growth returns, although at moderate rates. Commitment to reforms: key for consolidating the improvement in markets and increasing growth potential Section 3
Household consumption: signs of recovery in 2H13, growth in 2014 Section 4
Durable goods: the worst part is over. Improvement in fundamentals, but uneven pattern in demand Section 5
Deconstructing two myths: 1) do we consume less as we get older?, 2) are Spanish products suitable for e-commerce?
Contents
Consumption Outlook December 18th, 2013
Page 4
Economic growth (%) Source: BBVA Research and Haver
Global recovery continues, with increasing support from advanced economies
Risks are less extreme, but still tilted to downside
Slowdown in emerging markets, particularly in Asia
2,9
3,6
1,62,3
-0,4
1,1
4,85,2
-4
-2
0
2
4
6
8
20
13
20
14
20
13
20
14
20
13
20
14
20
13
20
14
World USA EMU BBVA-EAGLES
Baseline Baseline Jul-13
Section 1
Rebalancing of global growth
Consumption Outlook December 18th, 2013
Page 5
Global: manufacturing PMIs Source: BBVA Research based on Markit Economics data
Improved cyclical outlook in advanced economies …
… while waiting for improvements in GDP growth
Section 1
Rebalancing of global growth: improvement in advanced economies
46
48
50
52
54
56
58
60
Mar
10
Ju
l 1
0
No
v 1
0
Mar
11
Ju
l 1
1
No
v 1
1
Mar
12
Ju
l 1
2
No
v 1
2
Mar
13
Ju
l 1
3
No
v 1
3
Global Advanced economies BBVA Eagles
Consumption Outlook December 18th, 2013
Page 6
BBVA Research Financial Tensions Index: developed and emerging economies Source: BBVA Research
Section 1
Rebalancing of global growth: lower deterioration in emerging markets
After the slowdown in growth that followed the announced imminent cut in the pace of asset
purchases by the Fed (tapering), …
…, curbing the capital flight in some emerging markets and improving their outlook
…, financial tensions eased with its subsequent delay …
-0.5
-0.3
-0.1
0.1
0.3
0.5
0.7
0.9
1.1
1.3
-0.12
-0.10
-0.08
-0.06
-0.04
-0.02
0.00
0.02
0.04
0.06
Jan-1
2Feb
-12
Mar-
12
Apr-
12
May-1
2Ju
n-1
2Ju
l-12
Aug
-12
Sep
-12
Oct
-12
No
v-1
2D
ec-
12
Jan-1
3Feb
-13
Mar-
13
Apr-
13
May-1
3Ju
n-1
3Ju
l-13
Aug
-13
Sep
-13
Oct
-13
No
v-1
3D
ec-
13
Emerging economies (LHS)
Developed economies (RHS)
Consumption Outlook December 18th, 2013
Page 7
Section 1
Risks are less extreme, but still tilted to the downside
=
Disorderly exit from QE or lack of fiscal
agreement in the US. Higher interest rates and risk aversion
Adjustment in China and other EM
Sharp slowdown as a collateral effect of political
issues in emerging countries
Euro crisis
Lack of decisive progress to strengthen the banking union
and/or risks in ongoing bailout programs
Consumption Outlook December 18th, 2013
Page 8
Section 1
Rebalancing of global growth: higher contribution by developed economies and lower deterioration in emerging markets Section 2
Spain: growth returns, although at moderate rates. Commitment to reforms: key for consolidating the improvement in markets and increasing growth potential Section 3
Household consumption: signs of recovery in 2H13, growth in 2014 Section 4
Durable goods: the worst part is over. Improvement in fundamentals, but uneven pattern in demand Section 5
Deconstructing two myths: 1) do we consume more as we get older?, 2) are Spanish products adequate for e-commerce?
Contents
Consumption Outlook December 18th, 2013
Page 9
Section 2
The Spanish economy bottomed out in 2013
3Q13: domestic demand once again made a positive contribution to growth after 3 years
"in the red"...
Reasons: lower financial tensions, a less contractive fiscal policy and dynamic exports
…, while external demand remained on track
Spain: GDP growth and MICA-BBVA forecasts (q/q%) Source: BBVA Research, based on National Institute of Statistics data
4Q13: information available points to growth of around 0.3%
-1.5
-1.0
-0.5
0.0
0.5
1.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
2Q
09
3Q
09
4Q
09
1Q
10
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
(f)
CI at 20%
CI at 40%
CI at 60%
Observed (f: MICA BBVA Research forecast)
Consumption Outlook December 18th, 2013
Page 10
Section 2
Recovery is following the stylized facts of previous cycles
Export growth
Investment in machinery and equipment
Gross operating surplus
New credit operations (flow)
Employment growth
GDP growth
Growth in the stock of credit
Stable
Stable
Stabilizing
Declining
Variables before the cycle
.
= .
Lagging variables
Consumption Outlook December 18th, 2013
Page 11
-5% 0% 5% 10% 15%
Norway
Sweden
Finland
France
Ireland*
United Kingdom
Italy
Denmark
Germany
Belgium
European Union
Euro area
Austria
Switzerland
Netherlands
Portugal
Spain Spanish exports have grown in the last year despite the recession
in the EU
This is partly due to an increase in the share of exports to BBVA-EAGLES countries and other
developed economies...
... but also to gains in Spanish competitiveness in both price and quality
Total exports (cumulative variation 1Q12-3Q13 in %, swda) (*): Data to 2Q13 Source: BBVA Research based on Eurostat
Section 2
Growth in exports: exceptional performance in Eurozone
Consumption Outlook December 18th, 2013
Page 12
Section 2
Wage moderation and increased productivity improve companies' positions
The maintenance of savings in the private sector and the reduction of investment...
... improving the position of companies and allowing them to start investing once decreased uncertainty consolidates
... have allowed a deleveraging process against the rest of the world over the last 5
years...
Spain: net foreign borrowing (-) / lending (+) needs (% GDP) Source: BBVA Research, based on National Institute of Statistics data
-15%
-10%
-5%
0%
5%
10%
2007 2013 (f)
Households Financial and nonfinancial companies Public sector Total
Consumption Outlook December 18th, 2013
Page 13
Section 2
Greater strength of investment …
Spain: exports and investment in equipment and machinery (2008=100) Source: BBVA Research, based on National Institute of Statistics data
Expected recovery in the Eurozone and dynamic exports ...
In fact, in the first three months of the year it grew 5.3%
... should lead to a recovery of investment in equipment
60
70
80
90
100
110
120
130
140
Dec
99
Jun 0
0D
ec
00
Jun 0
1D
ec
01
Jun 0
2D
ec
02
Jun 0
3D
ec
03
Jun 0
4D
ec
04
Jun 0
5D
ec
05
Jun 0
6D
ec
06
Jun 0
7D
ec
07
Jun 0
8D
ec
08
Jun 0
9D
ec
09
Jun 1
0D
ec
10
Jun 1
1D
ec
11
Jun 1
2D
ec
12
Jun 1
3D
ec
13
Jun 1
4D
ec
14
Exports GFKF: Equipement and Machinary
Consumption Outlook December 18th, 2013
Page 14
Section 2
Improvements in credit flows
Spain: new credit operations and repayments to the domestic private sector (Trend) Source: BBVA Research based on Bank of Spain
The Spanish economy has to go through an inevitable deleverage process...
Credit flows are expected to recover starting in the first half of 2014
... which is compatible with the provision of credit for solvent projects
100
150
200
250
300
350
Mar-
03
Mar-
04
Mar-
05
Mar-
06
Mar-
07
Mar-
08
Mar-
09
Mar-
10
Mar-
11
Mar-
12
Mar-
13
Mar-
14
Mar-
15
Mar-
16
Mar-
17
€bill
ions
New operations Repayments
Consumption Outlook December 18th, 2013
Page 15
General government: public deficit breakdown excluding aid to the financial sector (% GDP) Source: BBVA Research based on Ministry of Finance
Section 2
Fiscal consolidation: lower efforts in the short term
The fiscal effort has been significant in 2012 and 2013...
Deficit targets that are more consistent with recovery will lead to GDP growth in 2014
... and will ensure that public deficit remains at around 6.8% of GDP
9.1
2.6
4.8
6.8
1.6 1.7
6.8
-0.1 1.0
5.8
0
2
4
6
8
10
12
14
Pasi
ve
fisc
al p
olic
y
Fis
cal ef
fort
Defici
t 2
012
Pasi
ve
fisc
al p
olic
y
Fis
cal ef
fort
Defici
t 2
013
Pasi
ve
fisc
al p
olic
y
Fis
cal ef
fort
Defici
t 2
014
Deficit2011
2012 2013 2014
Consumption Outlook December 18th, 2013
Page 16
Spain: short-term employment-to-GDP elasticity (q/q %) Reduced VAR in first differences. 72-quarter rolling window Source: BBVA Research, based on National Institute of Statistics data
Job destruction has slowed down, in part as a result of wage moderation
The elasticity of employment to GDP has increased during the crisis. How will it behave
during the recovery?
If labor institutions had been more appropriate at the start of the crisis the destruction of a
million jobs could have been avoided
Section 2
The labor market is stabilizing
-0,2
0,0
0,2
0,4
0,6
0,8
1,0
Dec-
97
Jun-9
8D
ec-
98
Jun-9
9D
ec-
99
Jun-0
0D
ec-
00
Jun-0
1D
ec-
01
Jun-0
2D
ec-
02
Jun-0
3D
ec-
03
Jun-0
4D
ec-
04
Jun-0
5D
ec-
05
Jun-0
6D
ec-
06
Jun-0
7D
ec-
07
Jun-0
8D
ec-
08
Jun-0
9D
ec-
09
Jun-1
0D
ec-
10
Jun-1
1D
ec-
11
Jun-1
2D
ec-
12
Jun-1
3
Consumption Outlook December 18th, 2013
Page 17
Spain: residential investment, compared with previous recessions (Maximum during expansion = 100) Source: BBVA Research, based on National Institute of Statistics data
The recovery of investment in the real-estate sector tends to run ahead of the cycle...
The reform process must also ensure an efficient redistribution of resources between
sectors
... however, the current over-supply will make it unlikely that this time it will accompany the
recovery (effect vs cause)
Section 2
The real-estate cycle: "This time is different"
40
50
60
70
80
90
100
110
120
130
140
tt+
1t+
2t+
3t+
4t+
5t+
6t+
7t+
8t+
9t+
10
t+11
t+12
t+13
t+14
t+15
t+16
t+17
t+18
t+19
t+20
t+21
t+22
t+23
t+24
t+25
t+26
t+27
t+28
t+29
t+30
t+31
t+32
Quarters
Mar-80 Sep-90 Dec-06
Consumption Outlook December 18th, 2013
Page 18
Section 2
2014: the start of recovery
Spain: GDP growth by autonomous region (% y/y) Source: BBVA Research
Spain has bottomed out in 2013 with a GDP fall of 1.3% and will begin to grow in 2014 by
0.9%
… and the exposure to external demand
Regional variations are due to the heterogenous fiscal efforts in 2012, the uneven
target deficits for 2013 …
AND
ARAAST
B. IS.
C. IS.
CNT
CYL
CLM
CAT
EXT
GAL
MAD
MUR
NAV
BASQ
RIO
VAL
SPA
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
-2.0 -1.8 -1.6 -1.4 -1.2 -1.0 -0.8 -0.6 -0.4 -0.2 0.0
Gro
wth
in 2
01
4
Growth in 2013
Consumption Outlook December 18th, 2013
Page 19
Section 2
The need of continuing the reform processes
Relatively negative scenarios such as those of the IMF would imply more than one lost
decade
The objective would be to implement the reforms needed in order to increase the
economy's growth potential
In their absence, the unemployment rate will remain high and recovery will be slow
Spain: GDP growth in different scenarios (2008=100) Source: BBVA Research, based on National Institute of Statistics and IMF
80
85
90
95
100
105
110
20
08
20
09
20
10
20
11
20
12
20
13
(f)
20
14
(f)
20
15
(f)
20
16
(f)
20
17
(f)
20
18
(f)
Growth forecast 1.5% yoy
Growth forecast 2.5% yoy
IMF's growth forecast
Consumption Outlook December 18th, 2013
Page 20
Section 1
Rebalancing of global growth: higher contribution by developed economies and lower deterioration in emerging markets Section 2
Spain: growth returns, although at moderate rates. Commitment to reforms: key for consolidating the improvement in markets and increasing growth potential Section 3
Household consumption: signs of recovery in 2H13, growth in 2014 Section 4
Durable goods: the worst part is over. Improvement in fundamentals, but uneven pattern in demand Section 5
Deconstructing two myths: 1) do we consume more as we get older?, 2) are Spanish products adequate for e-commerce?
Contents
Consumption Outlook December 18th, 2013
Page 21
Spain: private consumption growth (%) Source: BBVA Research based on the National Institute of Statistics
Section 3
Household consumption: signs of recovery in 2H13, growth in 2014
Disposable income: • Change of cycle in the labor market
Wealth: • Increase in financial wealth
Likelihood to consume: • Lower uncertainty
Factors that determine consumption:
Debt: • Deleveraging of the private sector • Deleveraging of the public sector
-6
-5
-4
-3
-2
-1
0
1
2
3
Mar
08
Jun 0
8Sep 0
8D
ec
08
Mar
09
Jun 0
9Sep 0
9D
ec
09
Mar
10
Jun 1
0Sep 1
0D
ec
10
Mar
11
Jun 1
1Sep 1
1D
ec
11
Mar
12
Jun 1
2Sep 1
2D
ec
12
Mar
13
Jun 1
3Sep 1
3D
ec
13
Mar
14
Jun 1
4Sep 1
4D
ec
14
% y/y Average
Consumption Outlook December 18th, 2013
Page 22
Spain: change in employment and unemployment rate (%) Source: BBVA Research based on the National Institute of Statistics
Section 3
Household consumption: signs of recovery in 2H13, growth in 2014
The labor market reform has helped to rebalance the adjustment between quantities
(employment) and prices (wages) …
…, which has helped to avoid a larger decline in the number of employed people over the last
year
Sustained employment recovery will come in 2H14…, but increases in employment can also
happen in 1H14
1. Change of cycle in the labor market
0
6
12
18
24
30
-7.5
-6.0
-4.5
-3.0
-1.5
0.0
2008 2009 2010 2011 2012 2013 2014
Employment (% lhs.) Unemployment rate (% rhs.)
Consumption Outlook December 18th, 2013
Page 23
Section 3
Household consumption: signs of recovery in 2H13, growth in 2014
The easing of financial tensions has helped stock prices and has reduce financing costs → ∆
of net financial wealth
BBVA Research estimates:
Quarterly ∆ in real net financial wealth of 1% → Cumulative 0.2% ∆ of private consumption over the next 4 quarters
2. Increase in financial wealth Spain: real net financial wealth (Deflated by the consumption deflator, swda figures, %) Source: BBVA Research based on BoS and National Institute of Statistics
Real net financial wealth: ∆17.4% since 2Q12 → +3.2 pp of consumption growth until 2Q14
-30
-25
-20
-15
-10
-5
0
5
10
15
20
Mar
-08
Jun-0
8
Sep-0
8
Dec-
08
Mar
-09
Jun-0
9
Sep-0
9
Dec-
09
Mar
-10
Jun-1
0
Sep-1
0
Dec-
10
Mar
-11
Jun-1
1
Sep-1
1
Dec-
11
Mar
-12
Jun-1
2
Sep-1
2
Dec-
12
Mar
-13
Jun-1
3
% yoy %qoq
2Q12-2Q13: +17,4%
Consumption Outlook December 18th, 2013
Page 24
Section 3
Household consumption: signs of recovery in 2H13, growth in 2014
BBVA Business Trends Survey: expectations of the economic situation (Net responses. A value <0 indicates a worsening) Source: BBVA Research
The perception about the economic situation has improved over the last six months ...
… more than it was expected six months ago
1H14: positive outlook
3. Less uncertainty, both in macroeconomic terms…
-100
-80
-60
-40
-20
0
20
40
60
1H11 2H11 1H12 2H12 1H13 2H13 1H14 (f)
Expectations Situation with respect to last semester
Consumption Outlook December 18th, 2013
Page 25
Section 3
Household consumption: signs of recovery in 2H13, growth in 2014
Spain: impact of a 5-point confidence increase* on the level of consumption (%) (*) Perception of the household regarding its future economic situation Source: BBVA Research, based on National Institute of Statistics and European Commission
Lower uncertainty encourages consumption at the expense of saving
Household´s saving rates will remain at historically low levels
3. …, and in microeconomic terms
0,0
0,00,0
0,3
0,2
0,1
-0,05
0,00
0,05
0,10
0,15
0,20
0,25
0,30
1st year 2nd year 3rd year
+5 points permanent +5 points temporary
Consumption Outlook December 18th, 2013
Page 26
Section 3
Household consumption: signs of recovery in 2H13, growth in 2014
Spain: new consumer financing operations (% y/y of third-order moving average) Source: BBVA Research based on Bank of Spain
New consumer credit operations have grown between January and October due to the increase in mid and long term financing …
…, within a context of deleveraging and high interest rates
Leverage ratio (over GDP): in line with European economies (6.1%)
4. Household deleveraging (I)
-80
-60
-40
-20
0
20
40
60
Jan-1
1Feb
-11
Mar-
11
Apr-
11
May-1
1Ju
n-1
1Ju
l-11
Aug
-11
Sep
-11
Oct
-11
No
v-1
1D
ec-
11
Jan-1
2Feb
-12
Mar-
12
Apr-
12
May-1
2Ju
n-1
2Ju
l-12
Aug
-12
Sep
-12
Oct
-12
No
v-1
2D
ec-
12
Jan-1
3Feb
-13
Mar-
13
Apr-
13
May-1
3Ju
n-1
3Ju
l-13
Aug
-13
Sep
-13
Oct
-13
Total < 1 year 1-5 years > 5 years
Consumption Outlook December 18th, 2013
Page 27
Section 3
Household consumption: signs of recovery in 2H13, growth in 2014
4. Household deleveraging (II) BBVA Business Trends Survey: expectations of supply and demand for consumer credit (Net responses. A value of <0 indicates a worsening) Source: BBVA Research
Recovery in consumer finance was already noted in the 1H13 Business Trends Survey
The 2H13 Business Trends Survey suggests that it has evolved better than expected …
…, and it will continue to do so, at least during the first half of 2014
-90
-75
-60
-45
-30
-15
0
15
30
45
2H10 1H11 2H11 1H12 2H12 1H13 2H13 1H14(f)
Supply Supply expectations
Demand Demand Expectations
Consumption Outlook December 18th, 2013
Page 28
Section 3
Household consumption: signs of recovery in 2H13, growth in 2014
The increase in VAT alters the inter-temporal pattern of household consumption …
…, and has permanent effects on its level of expense
5. Consequences of public sector deleveraging
Spain: response to a 2-pp increase in VAT (Deviation from trend, %) Source: BBVA Research. Simulations with REMS
Nevertheless, the transfer of the increase in VAT to prices was limited (of around 1 point)
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
-4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15Quarters
GDP Consumption
VAT hike in T0
Consumption Outlook December 18th, 2013
Page 29
Section 1
Rebalancing of global growth: higher contribution by developed economies and less deterioration in emerging markets Section 2
Spain: growth returns, although at moderate rates. Commitment to reforms: key for consolidating the improvement in markets and increasing growth potential Section 3
Household consumption: signs of recovery in 2H13, growth in 2014 Section 4
Durable goods: the worst part is over. Improvement in fundamentals, but uneven pattern in demand Section 5
Deconstructing two myths: 1) do we consume more as we get older?, 2) are Spanish products adequate for e-commerce?
Contents
Consumption Outlook December 18th, 2013
Page 30
Section 4
Demand for durable goods: the worst part is over
Spain: availability of consumer goods (swda data, 1Q08 = 100)) Source: BBVA Research, based on Ministry of the Economy
Consumption of durable goods may have bottomed out …
…, after the collapse in 4Q12 and 1Q13 …
…, triggered by the consequences of the VAT hike and the elimination of the public employee
bonus
0
20
40
60
80
100
Mar
-08
Jun-0
8
Sep-0
8
Dec-
08
Mar
-09
Jun-0
9
Sep-0
9
Dec-
09
Mar
-10
Jun-1
0
Sep-1
0
Dec-
10
Mar
-11
Jun-1
1
Sep-1
1
Dec-
11
Mar
-12
Jun-1
2
Sep-1
2
Dec-
12
Mar
-13
Jun-1
3
Sep-1
3
Consumer goods Food products
Durables Other non-durables
VAT hike VAT hike
Consumption Outlook December 18th, 2013
Page 31
Section 4
Demand for durable goods: the worst part is over
…, accompanied by the business channel in 2H13
Spain: private car registrations per channel (swda data, 3MA, Jan-09 = 100) Source: BBVA Research based on ANFAC and Ganvam data
The PIVE has limited the negative impact of the VAT hike (less than 680,000 registrations in
2013 without it) …
Vehicles: sales pattern shaped by the PIVE (Efficient Vehicle Incentives
Program)
The private channel is responsible for the increase in registrations in 2013 …
…, but it has not prevented the continued ageing of the vehicle fleet (52.3% of private
cars are 10 years old or older) and the increase in the UC/NC ratio (2.2)
0
25
50
75
100
125
150
175
200
Jan-0
9
Apr-
09
Aug
-09
Dec-
09
Apr-
10
Aug
-10
Dec-
10
Apr-
11
Aug
-11
Dec-
11
Apr-
12
Aug
-12
Dec-
12
Apr-
13
Aug
-13
Dec-
13
(f)
Total Private Company cars Renting
Plan 2000E End of 2000E Plan + ∆VAT
∆VAT + PIVE
Consumption Outlook December 18th, 2013
Page 32
Section 4
Demand for durable goods: the worst part is over
Growth in car registration dependent on the PIVE being maintained
Spain: car registrations Source: BBVA Research
2013: around 720,000 units
2014: shaped by whether the bonus will be maintained or eliminated (∆7.5% if the PIVE is
extended)
The improvement in its determining factors (pcGDP, unemployment and oil relative prices) could offset the impact of the elimination of the
PIVE
-30
-20
-10
0
10
0
300
600
900
1200
2008 2009 2010 2011 2012 2013 2014 L/T
% y
oy
Tho
usa
nds
of
cars
Actual Forecast
actual % yoy (RHS) forecasted %yoy (RHS)
Consumption Outlook December 18th, 2013
Page 33
Motorcycles: seven years later, light at the end of the tunnel
Spain: motorcycle registrations (swda data, 1Q08 = 100) Source: BBVA Research, based on DGT and Anesdor
The market could have bottomed out in 1H13
However, there will be fewer than 97 thousand motorcycles registered at the end of 2013
(-4.7%)
In 2014, 105,000 units could be reached if the fundamentals improve as expected
Section 4
Demand for durable goods: the worst part is over
0
20
40
60
80
100
120
140
mar
-08
jun-0
8
sep
-08
dic
-08
mar
-09
jun-0
9
sep
-09
dic
-09
mar
-10
jun-1
0
sep
-10
dic
-10
mar
-11
jun-1
1
sep
-11
dic
-11
mar
-12
jun-1
2
sep
-12
dic
-12
mar
-13
jun-1
3
sep
-13
Dec-
13
(f)
Registrations Motorcycle fleet
Moto-E Plan
Consumption Outlook December 18th, 2013
Page 34
Furniture: awaiting housing demand Spain: business figures for furniture and housing investment (swda data, 1Q08 = 100)) Source: BBVA Research, based on National Institute of Statistics data
Stable sales, prices relatively low (-0.9% since Jun-13)
BBVA Research estimates: 1% ∇ q/q in nominal housing investment →
0.6% ∇ cumulative sales
The expected recovery in housing demand during 2H14 will help to encourage furniture
consumption
Section 4
Demand for durable goods: the worst part is over
20
30
40
50
60
70
80
90
100
Mar-
08
Jun-0
8Sep
-08
Dec-
08
Mar-
09
Jun-0
9Sep
-09
Dec-
09
Mar-
10
Jun-1
0Sep
-10
Dec-
10
Mar-
11
Jun-1
1Sep
-11
Dec-
11
Mar-
12
Jun-1
2Sep
-12
Dec-
12
Mar-
13
Jun-1
3Sep
-13
Dec-
13
Mar-
14
Jun-1
4Sep
-14
Dec-
14
Furniture(sales volume, trend) Nominal Housing Investment
Real Housing Investment
Consumption Outlook December 18th, 2013
Page 35
White line: positive signs…, when the 2nd derivative is analyzed
Spain: sales of electrical appliances by household (% y/y of number of units) Source: BBVA Research, based on ANFEL data
Sales Jan-Oct 2013: -7.4% y/y (-13.9% in 2012)
Sales were lower in all electrical appliance categories, but all to a lesser degree than in
2012 (except fridges and freezers)
Section 4
Demand for durable goods: the worst part is over
Relative price fall: -1.6% between June and October
-40
-30
-20
-10
0Fridges
Freezers
Washing Machines
Driers
Dish WashersCookers
Ovens
Counter Tops
Total
2012 Jan-Oct 2012 Jan-Oct 2013
Consumption Outlook December 18th, 2013
Page 36
Brown lines: falling penetration rates Spain: real retail sales of brown goods (swda data, Jan-11 = 100) Source: BBVA Research based on Eurostat
Sluggish demand: digesting the purchases that were brought forward before the VAT increase
The across-the-board fall in prices has not prompted increased penetration of Spanish
homes in 2013 ...
Section 4
Demand for durable goods: the worst part is over
…, except for mobile devices: tablets (16.3%) and mobile telephones (96.1%)
60
65
70
75
80
85
90
95
100
105
Jan-1
1
Apr-
11
Jul-1
1
Oct
-11
Jan-1
2
Apr-
12
Jul-1
2
Oct
-12
Jan-1
3
Apr-
13
Jul-1
3
Oct
-13
Consumer Electronics ICT Retail trade (exc food)
∆VAT
Consumption Outlook December 18th, 2013
Page 37
Section 1
Rebalancing of global growth: higher contribution by developed economies and less deterioration in emerging markets Section 2
Spain: growth returns, although at moderate rates. Commitment to reforms: key for consolidating the improvement in markets and increasing growth potential Section 3
Household consumption: signs of recovery in 2H13, growth in 2014 Section 4
Durable goods: the worst part is over. Improvement in fundamentals, but uneven pattern in demand Section 5
Dismantling two myths: 1) do we consume more as we get older?, 2) are Spanish products adequate for e-commerce?
Contents
Consumption Outlook December 18th, 2013
Page 38
Spain: average consumption per household by main breadwinner's age. 2007 and 2012 Source: BBVA Research based on National Institute of Statistics (Household budget survey)
The Spanish population has aged over the last four decades and will continue to do so in the
coming decades
Dependency ratio: 16.5% in 1973; 26.7% in 2013; 72.4% (f) in 2050
What consequences this ageing have on consumption spending in Spanish homes?
Section 5
Dismantling two myths: 1) do we consume more as we get older? No
The cross section data seems to suggest that the consumption by age has an inverted U
shape …
Box 1
9.5
9.7
9.9
10.1
10.3
10.5
10.7
24
-26
27
-29
30
-32
33
-35
36
-38
39
-41
42
-44
45
-47
48
-50
51
-53
54
-56
57
-59
60
-62
63
-65
66
-68
69
-71
72
-74
75
-77
78
-80
LN
(Ho
use
ho
ld c
onsu
mptio
n i
n
20
11
€)
Age of the household´s main breadwinner
2007 2012
Consumption Outlook December 18th, 2013
Page 39
Spain: relative consumption per household by age and cohort Source: BBVA Research based on National Institute of Statistics (ECPF-EPF)
…, however, this result is not caused by ageing, but by the permanent income (cohort), the size
and composition of the household
BBVA Reseach estimates that consumption is an increasing and concave function of age
Section 5
Dismantling two myths: 1) do we consume more as we get older? No
‘At each age, we consume more than our parents and less than our children will do’ →
ageing might have positive effects on household spending
Box 1
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
272931333537394143454749515355575961636567697173757779
Consu
mption p
er
house
hold
(2
01
1€
)26 y
ears
= 1
Age of the main breadwinner
Age effect
0.0
0.2
0.4
0.6
0.8
1.0
1968-1
970
1965-6
7
1962-6
4
1959-6
1
1956-5
8
1953-5
5
195
0-5
2
1947-4
9
1944-4
6
1941-4
3
1938-4
0
1935-3
7
1932-3
4
1929-3
1
1926-2
8
1923-2
5
1920-1
922
Consu
mption p
er
house
hold
(2
01
1€
)Bir
th y
ear
1971
-1973 =
1
Birth cohort
Cohort effect
Consumption Outlook December 18th, 2013
Page 40
Spain vs Europe: a breakdown of the digital gap (Scale from 1 (minimum) to 7 (maximum), 2013) Source: BBVA Research based on WEF
The use of new technologies is substantially lower in Spain than in other advanced
economies …
… particularly amongst companies ...
Section 5
Dismantling two myths: are Spanish products adequate for e-commerce? Yes
…, which limits the expansion in e-commerce
Box 1
1
2
3
4
5
6
7
Aff
ord
ab
ility
Busi
ness
usa
ge
Eco
no
mic
im
pact
Political and
regu
lato
ryen
vir
on
men
t
Ind
ivid
ual
usa
ge
Infr
ast
ructu
re a
nd
dig
ital
con
ten
t
Govern
ment
usa
ge
So
cial Im
pact
Skill
s
Inn
ovati
on
env
iron
men
t
Spain Germany Sweden
Consumption Outlook December 18th, 2013
Page 41
Companies selling online, 2012-13 (Percentage of companies with at least 10 employees where online sales are at least1% of their total sales) Source: BBVA Research based on Eurostat
In addition to the lack of resources, there are idiosyncratic factors that hamper e-commerce in
Spain
In particular, the belief that the product is not adequate to be sold electronically
Section 5
Dismantling two myths: are Spanish products adequate for e-commerce? Yes
However, the % of companies that sale online in Spain is lower than in leading countries,
regardless of the size or sector of activity (lack of innovation and deficit of human capital)
Box 2
0
10
20
30
40
50
Tota
l
1-9
10
-49
50
-24
9
25
0 o
r m
ore
Manu
factu
ring
En
erg
y
Co
nst
ructio
n
Reta
il
Tra
nsp
ort
atio
n
ICT
Real Sta
te
Pro
fess
ion
al a
ctiv
itie
s
Adm
inis
trativ
e s
erv
ices
Business size Business sector
Spain Germany
Consumption Outlook December 18th, 2013
Page 42
In short ...
More balanced composition of global growth. Risks are less extreme, but still tilted to downside
The Spanish economy has begun to grow following the stylized facts from previous cycles
Private consumption is rising steadily, underpinned by the improvement in its determining factors and by improved financing …
…, but no euphoria: fundamentals are still weak, households are still indebted
Durable goods: the worst part is over
E-commerce: a question of business survival
In the long term, the demographic transition could favor consumption
1
2
3
4
5
6
7
Consumption Outlook Second half 2013
Madrid, December 18, 2013
Consumption Outlook December 18th, 2013
Page 44
Spain and Europe: macroeconomic forecasts Source: BBVA Research based on official bodies
Annex Section 2
Scenario 2013-2014: start of recovery
Spain EMU Spain EMU Spain EMU Spain EMU Spain EMU
Households final consumption expenditure 0.1 1.0 -1.2 0.3 -2.8 -1.4 -2.6 -0.5 0.1 0.7
General government final consumption exp. 1.5 0.6 -0.5 -0.1 -4.8 -0.5 -1.7 0.2 -1.6 0.4
Gross fixed capital formation (G.F.C.F.) -5.5 -0.6 -5.4 1.7 -7.0 -3.8 -6.4 -3.6 0.7 2.2
Equipment and cultivated assets 4.3 5.6 5.3 4.7 -3.9 -4.2 1.0 -3.8 6.5 3.4
Equipment and machinery 5.0 5.7 5.5 4.7 -3.9 -4.2 1.1 -3.8 6.5 3.4
Housing -11.4 -3.0 -12.5 -0.3 -8.7 -3.4 -9.0 -3.0 -0.7 2.0
Other constructions -8.4 -6.1 -9.2 -0.2 -10.6 -4.9 -12.6 -5.7 -5.3 -0.9
Changes in inventories (*) 0.3 0.6 -0.1 0.2 0.0 -0.5 0.0 0.0 0.0 0.0
Domestic Demand (*) -0.6 1.2 -2.1 0.7 -4.1 -2.2 -3.1 -1.0 -0.1 0.8
Exports 11.7 11.4 7.6 6.7 2.1 2.7 4.6 1.7 6.3 3.9
Imports 9.3 9.8 -0.1 4.6 -5.7 -0.8 -1.0 0.4 3.4 3.7
External Demand (*) 0.4 0.7 2.1 0.9 2.5 1.5 1.8 0.6 1.1 0.3
GDP mp -0.2 1.9 0.1 1.6 -1.6 -0.6 -1.3 -0.4 0.9 1.1
Pro-memoria
GDP excluding housing 0.8 2.2 1.0 1.7 -1.2 -0.5 -0.9 -0.2 1.0 1.0
GDP excluding contruction 1.8 2.7 2.0 1.8 -0.4 -0.2 0.0 0.1 1.4 1.1
Total employment (LFS) -2.3 -0.5 -1.9 0.3 -4.5 -0.7 -3.1 -0.9 0.0 0.1
Unemployment rate (% Active pop.) 20.1 10.1 21.6 10.2 25.0 11.4 26.3 12.0 25.6 12.0
Current account balance (% GDP) -4.5 0.0 -3.8 0.1 -1.1 1.2 1.2 2.1 1.8 2.1
Public debt (% GDP) (**) 61.7 85.4 70.4 87.3 85.9 90.6 94.4 94.5 98.4 94.8
Public deficit (% GDP) -9.6 -6.2 -9.1 -4.1 -6.8 -3.7 -6.8 -2.8 -5.8 -2.4
CPI (average) 1.8 1.6 3.2 2.7 2.4 2.5 1.5 1.5 1.1 1.4
CPI (end of period) 3.0 2.0 2.4 2.9 2.9 2.3 0.6 1.3 1.3 1.4
2013 (f) 2014 (f)20112010 2012(% YoY)
(*) Contribution to GDP Growth (**) Excluding aid to the banking sector in Spain
(f): forecast