Spain: A cloudier start of the year for corporates

3 min
Georges Dib
Georges Dib Economist for Latin America, Spain and Portugal

Corporates are more pessimistic than optimistic about their performance as 2019 kicks in. Business confidence fell again, by -1% q/q after -1.7% in Q4 2018. For the first time in two years, the expectations balance for Q1 (difference between pessimistic and optimistic responses) is negative. This is in line with the latest weak “hard data” in Spain and Eurozone trade partners. In November, Spanish industrial production fell -2.6% y/y in seasonally-adjusted terms, its largest drop in five years. Over the past years, Spanish companies have enjoyed high margins (>43% of gross value added); but unit labor cost has reached again its 2012 level (before the decentralization of collective bargaining) and wages could moderately rise. The capacity utilization rate has dropped closer to its long-term average. Amid more challenging domestic and external environments, insolvencies could rise +2% in 2019.