Yesterday we received a report submitted from a Spanish blogger who wishes to remain anonymous, in which the author, in 7 brief pages, describes why in his view Spain's GDP is massively overrepresented (and coming just before Moody's downgrade of Spain earlier today). The report (attached below) provides extensive validation for this hypothesis using employment data, information from the service sector, construction output, industry data and foreign sector data. The various data lead the author to observe that: "ΔNational Income= ΔDemand of goods + ΔDemand of services = -56,392 – 11,115 = -67,507 million €, which means a fall of GDP by 24.6% for the biennium 2008-2009."
More from the author.
If this fake is confirmed, the repercussions would be enormous. Because the official discourse of the Spanish government about a supposed adjustment of the Spanish economy would be proved false.
* Productivity per employee instead of growing, would be falling at record rates.
* Unit labour costs would be increasing across all sectors.
* Company profits would have suffered a big drop.
* The Debt to GDP ratio would increase considerably.
* Public deficit for 2009 would have reached from 11.2% to 13.5% of GDP.
And the conclusion:
As seen, this calculation gives us a drop in internal demand bigger than the same number reached with the previous method, 40,555 million €. The divergence could originate because the MPM, when in the middle of a collapsing internal demand, could fall significantly; on the other hand, the drop in GDP could have been underestimated with the other method due to the accumulation of stocks in the construction sector, or maybe both effects are at work here. Anyhow, both methods are completely at odds with the fall in the national income reported in the National Accounts and makes consistent the hypothesis of a vast manipulation of data.
As for where this gets really interesting, is the fact that none other than Goldman has immediately issued a rebuttal of the report. Permabull Erik Nielsen has just released a statement in which he says the report is not to be believed at all as it "makes little sense":
I suspect that the reason why anyone cares at all is (1) the bad experience with Greek statistics (but there is no indication what so ever that Spain suffers from anything like that), and (2) a continued general scepticism towards peripheral Europe, so … anything goes.
Our view of the piece is best summarised by this posted comment (not from us, but from someone identifying him or herself as jkc: "The incongruity comes in why they tracked so well before, but no longer do" This is called "spurious correlation" which is what you get when comparing apples and oranges or "Market Services Gross Value Added", a productivity metric for the private sector, to a production level metric "Indicator of *Activity* in the Service Sector." It is not odd for productivity to follow a different path than production in a recession (i.e productivity can increase while production goes down which leads to relatively high(er) unemployment. You will find the same pattern for the US.”
Maybe it is better said that a report written by an anonymous blogger has more weight, (as demonstrated by the response from the denizens of Chiswick) than any "credible" reports disseminated by the official Spanish channels. As for Goldman, they certainly doth protest too much. And as for "spurious correlation", we will revisit the realized correlation which will be determined after a few years, when all the filters masking the actual data will finally have been removed.
Full report below (pdf)