Balearics bucks retail trend

Spanish retail sales fell for the thirty-sixth month running in June, offering a snapshot of the shrinking consumer spending that is hampering a long-awaited economic recovery.

With Spain increasingly reliant on exports to generate growth, its current account - the broadest measure of a country's terms of trade - turned to a surplus in May.

The recession has lasted since the end of 2011, though economic output fell just 0.1 percent between April and June, leading the government to state the slump was over. Economists are not convinced, saying the second quarter improvement from a 0.5 percent contraction between January to March could be short-lived because it relied mostly on seasonal gains in tourism and too many Spaniards remain out of work. Calendar-adjusted retail sales fell 5.1 percent year-on-year in June, according to National Statistics Institute data yesterday, while the Bank of Spain said the current account posted a 2.4 billion euro surplus in the previous month. “It's no secret that domestic demand remains very weak because spending is massively impaired by unemployment and austerity,” Gilles Moec, analyst at Deutsche Bank, said.

Spain's unemployment rate is above 26 percent. That has impeded spending on the high street, as have the high budget gaps that have forced the government of Prime Minister Mariano Rajoy to cut expenditure and hike taxes.

New austerity measures are increasingly likely after the central government reported its fiscal deficit was 3.8 percent of gross domestic product at the end of June, already up to the end-of-year target. “Whenever the economy starts breathing, you'll have additional pressure to start cutting the deficit, so we get in to additional austerity and spending will fall. It's going to be a choppy ride,” Moec said.