Get your stats out

No, not really an economic miracle, but inflation dropped slightly in September to a respectable annual rate of 2.9%, down from 3.7% in August. The causes trotted out by the National Statistics Institute are falls in the price of fuel (Spain’s economy is particularly susceptible to petrol price rises), so clenched-fist saluting and groin-clutching by finance minister Pedro Solbes are not the order of the day – I hope you’re listening, Pedro – as this is pure luck. Whether the latest interest rate rises are starting to bite yet has not been declared, though anecdotal evidence suggests Spain’s mainly variable-rate mortgage holders are starting to tighten their belts.

But this is all largely an exercise in smoke and mirrors. Keeping inflation down is important, especially where there’s no control over exchange rates, and yes, it is nice that Spain’s growth rate (3.7% at the last count) is high, but the Socialist Party economics crowd would sooner admit to a spot of crossdressing than bring out the crucial productivity statistics.

As money is ploughed into construction, investment cash is being crowded out from other activities, such as investment in plant and machinery and new technologies that would raise productivity and competitiveness. So whilst more, predominantly low-quality, jobs are being created, the average Spanish worker isn’t producing any more than they were 5 years ago, making real wage rises difficult to justify. And in the meantime the cost of living is skyrocketing, leaving Paco having to get tough with Pili as the difficult issue of the new sofa is brought up on the monthly trudge round Ikea.  


~ by Daniel on October 12, 2006.

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