Shopping Centres in Spain. October 2009
Economic context
Rate Household Saving Grows Rate Household Saving Grows accounts Evolution of household Evolution of household accounts
The first half of 2009 was a difficult period, characterised by the ongoing financial crisis and a further decrease in activity. There is continued uncertainty then, regarding how long the recession will last and, most importantly, how quickly the economy will recover.
Gross disposable income Savings Rates 12%
9%
International economies are still showing a downward trend but are now falling less sharply. Governments have continued to put in place measures to cope with the crisis and there is now talk of recovery in Europe. The Spanish economy is still suffering a severe fall in activity, basically due to factors such as the unusual duration of the financial difficulties, the decrease in domestic demand, the process of deleveraging in the private sector and the re-dimensioning of the property sector, both in its activity and in the demand for housing. The excess of housing is expected to last until 2010 or 2011, which could cause an accumulated drop in prices of more than 25% up to 2011. On the other hand there are certain factors which help offset the downward economic trend, such as fiscal stimulus packages and the reduction of interest rates and inflation. The current negative inflation increases household purchasing power, although the risk of deflation is low. Various sources place the CPI rate (which determines the increase in rental level on most lease contracts in Spain) at 1%.
Final consumption households
15%
6%
3%
0% 2003
2004
2005
2006(P)
2007(P)
2008(A)
2009(A)
-3% S ource: INE Sept ember 2009
slowdown in the deterioration of many indicators, which has removed the sensation of free-fall experienced at the end of 2008 and beginning of 2009. This becomes most obvious in consumer spending, where the fall in sales of durables, such as cars and household products, has stabilised. An improvement in consumer confidence has also been perceived, showing slight signs of recovery. Consumer spending is one of the factors that most affects the shopping centre sector and it is not expected to recover in the short term, as the basic principles of the economy are still keeping household spending low. Household wealth has decreased particularly due to the fall in house prices and the limited availability of consumer credit.
unemployment. On another note, the household saving rate is showing a marked increase, basically as a precaution against the crisis and due to a major reduction in investment in housing. Over the last year the average savings rate has hit the record figure of 16.8%, compared with an average of 11% since 2001. In short, whilst some economic indicators are stabilising, there is still a long way to go before the Spanish economy begins to recover. Everything indicates that serious structural changes will be necessary to reduce unemployment levels and lay the foundations for a new period of sustained growth. The recovery will be real when private demand can take over from public stimulus.
The factor which is having most effect on consumer spending is the drop in disposable income levels due to rising
Perhaps one of the most positive elements noticed towards the end of the first half of the year is the
Change in the trend of confidence Consumer and Retail Trade Confidence 0 -5 -10 -15 -20 -25 -30 -35 -40
Consumer confidence Medium Long Term Consumer C. Retail Trade Confidence Medium Long Term Trade C.
-45 -50 2006
2007
2008
2009
S ource: Eurostat October 2009 M ont ly Data)
COPYRIGHT JONES LANG LASALLE IP, INC. 2009. All rights reserved