The future now: the Spanish Paradox economic indicator – Spain GDP

Félix López – 7 de abril, 2015

We begin with this post our spanish paradox economic indicator of the Spanish economy. We will update it quarterly or when economic circunstances dictates us the urgency of the revision. Presently -end of 1st quarter 2015- Spain is growing strongly, probably in excess of 0.8% quarter on quarter growth, which translates to an 3.2% annual growth rate. Our model predicts further acceleration of growth to instantaneus growth rates of near 4% (1% quarterly growth rate) for the next twelve months.

Our quarterly model as is construed provides GDP levels. We prefer to state our growth predictions on the level of GDP one year after prediction´s date (which should roughly be an average of the next four quarter on quarter GDP annualised growth rates) than the most traditional way of stating growth rates as annual growth rates. These annual growth rates as commonly used in Spain (government forecasts, Bank of Spain, etc.) are comparisons of average GDP along each consecutive year and clearly understates the dynamics of growth when growth is accelerating and overstates growth when growth decays.

Presently Spain is generating a lot of new jobs because instantaneous GDP growth (how growth is actually occurring) is near 4% and not the 2,3 – 2,8% of growth rates that you will encounter in the press when applied to the Spanish economy.

Follow the blue line. This is how the level of GDP will be one year from now or, if you want, how much the monthly income of the Spanish Economy (kind of salary of aggregate Spain) will grow one year from now. How it is splitted between current workers and new workers, or capital income and labour income is another matter. In the next twelve months new workers, definetely, will get most of it, and the labour share of income will increase slightly. All in all, approx. 750.000 more jobs in one year time than now, if our decoration of our graphical scenario hereunder does not materially change much.

indicator 31st March 2015

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