Maybe many people outside (or even inside for that matter) Spain didn’t especially notice the fact, but last Sunday’s Barça match with Racing de Santander did not go out on regional TV as planned. This caused a few eyebrows to be raised among football supporters and commentators, but little in the way of serious analysis or comment. But the reason the match wasn’t broadcast is perhaps rather more interesting than many imagine, since behind Saturday’s blackout lies a dispute between the Catalan regional TV station and Barcelona football club which goes well beyond that sport where 22 able bodied men run up and down a pitch for 90 minutes and the Germans always win. The details of the present dispute are obscure, and this is not the place to go into them, but the nitty gritty is that Barça are asking local channel TV3 for 30 million euros, and the TV people quite simply aren’t coughing up. Which is in itself unusual, since it wasn’t all that long ago that the then President of the Spanish government, José Maria Aznar, was arguing that football was a question of national strategic interest in Spain. So it is clear (to me at least) that TV3 would pay (at least part of the quantity being asked for) if they could, but they obviously can’t. So why can’t they pay? This is when it all gets interesting, I think. Continue reading →

Spain’s unemployment, already the highest in the European Union, shot up again in January, rising by the most in at least 13 years, marking the 10th consecutive monthly increase as Spain’s recession continues to deepen.

The number of people registering as unemployed was up by 6.4 percent, or 198,838, from December, and the total reached 3.33 million, according to the latest INEM data release. That was the biggest month on month jump since at least 1996. From January 2008, the number of claimants jumped 47.12 per cent (just marginally above last months year-on-year increase of 46.93 per cent) or by more than a million.

The unemployment rate in Spain – 14.4 per cent in December – is already almost double the European average, compared with 7.4 per cent for the EU overall, according to the most recent monthly data from Eurostat.

Youth unemployment in Spain rose to 29.5 per cent, compared with an EU average of 16.6 per cent. Spain’s jobless rate hit an almost 30-year low of 7.95 per cent in the second quarter of 2007 at the peak of a construction boom that allowed the country to create more than half the new jobs in the euro region between 2002 and 2005. It has been rising ever since. It is hard to make precise projections given that we don’t know whether the current rate of contraction in economic activity will remain unchanged, increase, or decrease slightly as the year progresses, but my earlier estimate of around 4.5 million unemployed and a rate of around 20% by December looks pretty realistic at this point. What we dont know is how this will increase in 2010, and I guess projections at this point are premature. Continue reading →

Central Europe’s economies continued to contract in January – lead by their manufacturing industries – under the combined weight of a credit crunch and a slump in demand for their exports. My feeling as all three economies – Poland, the Czech Republic and Hungary – are now in recession. Hungary’s is clearly the worst case, and events are moving rapidly and negatively there, but the slowdown in the Czech Economy is also very pronounced, and Poland seems finally to be falling into line, following some internal financial chaos back in October. Based on back of the envelope type calculations derived from the PMIs I would say their economies were contracting at the following pace in January.

Q-o-Q Y-o-Y
Hungary -1% -4%

Czech Republic -1% -4%

These are only provisional assessments based on the PMIs and Consumer Confidence Indexes. They will be subject to calibration as we move forward and receive the real data, but all this should give us some general idea of what is happening, something which is badly needed in view of the suddenness of the change. Continue reading →

China’s manufacturing contracted for a sixth consecutive month in January as shrinking global demand hit the country’s export-driven economy. The CLSA China Purchasing Managers’ Index rose to a seasonally adjusted 42.2 from 41.2 in December. Since any reading below 50 indicates contraction, even though the rate of contraction dropped (and has been dropping since November, see chart below) China’s manufacturing sector (and hence China’s economy) is still contracting. What we don’t know at this point is how quickly China GDP is contracting, we won’t know that till someone with the time and ingenuity devises a way to calculate a rough and ready quarter on quarter (seasonally adjusted) output indicator. Come on, be famous for a day, go out and do it (since the Chinese statistics office apparently have no interest in the matter), I would, but I simply don’t have the time, since Europe, not China, is my focus. However, on a rough and ready, back of the envelope, basis my guess is that this months Chinese reading may be equivalent to something like a quarter on quarter contraction rate of around 0.5%, which means that what we have at this point is a 2% annual contraction rate, but we really need to see some actual data to calibrate all this a bit better I think.

Continue reading →

Russia’s current woes can be readily summed up in just one single variable – the value of the ruble – and this value, as we all know, is falling. Almost uncontrollably so.

The bank’s target will be “very quickly” breached without more intervention, said Gaelle Blanchard of Societe Generale SA in London. “Right now the market is convinced it wants to see the ruble lower,” Blanchard said. “As long as the central bank gives these targets, then speculators are going to have something to aim for.”

“The market is testing whether the authorities see this band as something permanent or something that will move,” said Lars Rassmussen, an emerging markets analyst at Danske Bank A/S. “Our view is that they’ll move it because it’s not worth wasting the reserves for a band that is obviously not wide enough.”

First Deputy Prime Minister Igor Shuvalov expressed regret that the general population failed to fully understand the Central Bank’s policy on the ruble’s exchange rate against the dollar/euro basket. The government did let the ruble depreciate, but it did so gradually, providing plenty of time for people to decide which currency to keep their savings in.

Continue reading →

The Economist Intelligence Unit warns:

State handouts cannot continue indefinitely, not least because reserves no longer cover total foreign liabilities: on the basis total debt was US$540bn at the end of September 2008, and that US$73bn was repaid in the fourth quarter, total debt is now US$467bn and private-sector debt US$425bn. Russia entered the crisis with the world’s third largest cache of central bank reserves, but it has been dwindling at an accelerating pace. By mid-January, reserves had declined to just below US$400bn, meaning that more than a third of the total was spent over the past five months.

Longer post coming over the weekend.

The International Labour Organization forecast this week that as many as 51 million jobs could be lost worldwide in 2009 due to the global economic crisis. But if I look at some of the numbers hitting my desk this week, even this estimate cound prove to be a conservative one.

Here in the EU, the most striking case is of course Spain, where unemployment hit 14.4% of the labour force in December. But perhaps the more significant developments are taking place at the moment in Germany, where the massive jobs machine evidently changed course in November, and where the seasonally unadjusted number of unemployed rose by 387,000 in December. Perhaps the chart which makes what is now happening in Germany clearest is the one below for employment creation, where we can see that the rate of new employment generation started to decline in the summer, and the line downwards is more or less constant, so while employment was still up year on year in November, it will soon turn negative, and will remain so for some considerable time to come.

In the United States the number of people staying on state jobless benefit rolls after drawing an initial week of aid jumped 159,000 to 4.78 million in the week ended January 17.

In Russia 800,000 people lost their jobs in December, and the total number of unemployed hit 5.8 million people, as compared with 5 million in November. But all of this pales in comparison with the number which has just come out of India, where it is now estimated that one million people lost their jobs in December alone.

So, while I have no exact idea of what the total job loss in December was globally, I am sure it was a large number, and I am also sure that if things continue at this pace, 51 million losses over the whole of 2009 will turn out to have been an optimistic estimate. The point is, of course, that these job losses are simply a noose which serves to further tighten the grip of the global recession, as less workers means less spending, and less spending means even less workers, and down and down we go in circular fashion, for the time being at least.

Update

Indeed the 51 million estimate for the whole of 2009 is already looking on the low side. Chen Xiwen, director of the Office of Central Rural Work Leading Group estimated this week that more than 20m rural migrant workers in China have already lost their jobs and returned to their home villages or towns as a result of the global economic crisis, and by the start of the Chinese new year festival on January 25, 15.3 per cent of China’s 130m migrant workers had lost their jobs and left coastal manufacturing centres to return home, according to data from the agriculture ministry survey.

Spain’s economy is now most evidently, and totally and completely officially, in its first recession since 1993. The final confirmation of this came yesterday when the Bank of Spain released its quarterly report on the Spanish economy. According to the bank, gross domestic product fell by 1.1% in the final quarter of 2008 (over the previous quarter), following a 0.2% decline in the third quarter. GDP fell year on year by 0.8%.

Continue reading →

IMF Senior Regional Representative For Central Europe and the Baltics, Christoph Rosenberg, recently took me to task on RGE Monitor about my Latvian devaluation proposal (as did RGE’s own Mary Stokes), and I would like now to take a closer look at some of the points they raise. Beware, this is not for the faint of heart. It is evidently long, at times turgid, but very definitely, I would hope, to the point. Continue reading →

Wow everyone, I presume it is just a coincidence that my Czech Post went live yesterday, but gee, there’s nothing like being ahead of the curve, is there? Bloomberg is running this story this morning:

The Czech economy may fall into a recession this year as export demand weakens, Prime Minister Mirek Topolanek said, iHned reported. The expectation that the economy may shrink is one of two scenarios with which the government is working, the news Web site cited Topolanek as saying. The premier made the comments after yesterday’s first meeting of the government’s National Economic Board, a panel of economic advisers. The Cabinet is preparing measures, including loan guarantees for selected industries and a reduction in payroll taxes, to boost investment, iDnes said.

I think I’m right in saying I was the first analyst out of the box on this one (although admittedly, the recession scenario is only one of two they have under consideration – but I do think it is the most realistic one, for the reasons I argue in the post). So last week I was leading the pack on China, this week on the CR, who knows where all this will now end…… (oh, and don’t forget Poland – and again Bloomberg this morning).