The Bank of Spain confirmed yesterday that the economy contracted 1.4% in 2012. Foreign exports were up, but they could not compensate for low spending caused by high unemployment and weak consumer spending.
After analyzing the first quarter of 2013, the Bank of Spain sees contradictory signals. Unemployment will continue to worsen as governments finally make much-needed job cuts, but the rate of layoffs will stabilize. The Bank of Spain cautions against a sanguine view for jobs, and rightfully so, because investment will remain weak. Consumer confidence is returning, but retail sales have been falling. These contradictory signs indicate that although we could be close to exiting the recession, we have yet to see the worst of it.
