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Increase in Spanish Retail Sales

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Spanish Retail Sales numbers have come in strong this morning, the year on year figure to April is reading at 0.7% growth compared with the -0.5% contraction in March. Consensus estimates for this month were for a drop of -0.3% in this key consumer activity indicator.

The Spanish economy is now firmly back on a recovery path, this is according to the International Monetary Fund (IMF) which yesterday stated that it expects Spain to continue improving it’s economic situation.

The IMF’s latest report on the country’s economy highlighted improving financial market conditions and growing exports as reasons for a pick up in sentiment. This in turn is encouraging greater Retail Sales as evidenced this morning and also a notable rise in business investment.

The achievement of difficult structural reforms, particularly in the labour markets, are being cited as one of the reasons that Spain is in such a strong position to benefit from a pick up in global activity. Employment conditions however have a long way to go before any return to pre crises levels can be obtained either in average earnings or in an unemployment level that is currently twice the EU average at over 25%.

Spanish public debt is rapidly approaching 100% of GDP, while not the worst in the Eurozone it is considered very high and is also moving in the wrong direction. The IMF has stressed that further efforts to bring borrowing under control must be taken in order to ensure stability in any long term growth that Spain may experience.

In a move that puts additional pressure on the European Central Bank (ECB), the IMF has stressed in it’s report Spain’s need for looser monetary policy in order to increase the chances of a successful transition back to growth. Spain is already benefiting from cheap bond market funding thanks to the ECB’s rhetoric but a further loosening of conditions will be vital.

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