Exports (again and again)

A couple of weeks ago we pointed out that:

The month-on-month merchandise exports correction that might well be expected in August will likely, viewed  on an annual basis, be amplified far beyond its actual significance by that outsized spike in August 2013. Unless some large transport equipment delivery shows up to save the day, we’ll be left (as usual) searching for the substance amidst the same base effects noise that we described in our last entry.

We're back to do just that.

So the Spanish merchandise export numbers came in yesterday pretty much according to our plan - minus 5.1 percent year-on-year. Not only did capital goods not save the day, but everything except energy was in the red.

Here are a couple of things to consider before deciding whether or not the month represents a notable change in trend.

First, these figures are yet another in the ample series of August euro zone economic stats that have been way below expectations. We continue to think that this is partly attributable to the calendar quirk that produced four complete work weeks in the month of August. That July exports were an all-time nominal record, without the aid of any internal outliers, mostly confirms our suspicion that vacations were taken integrally in the last full month of summer. More work done than usual in July, less in August.

Second, capital goods exports were weak, as we expected. But what surprised were foreign auto shipments at negative 1.8 percent. Javier, in his usual persistent fashion, has dug up a credible explanation for this. Taking his cue from the monthly production report from the auto manufacturers umbrella group, Anfac,

'August saw an 11.22% decline in production. This reflects the work stoppage necessary to adapt plants to the new models assigned to Spanish plants.'

he put together the chart on the left, comparing auto industry electrical demand to production - unchanged year-on-year. Then again, maybe they just forgot to turn out the lights before heading for the beach.

With regard to the remaining items, fresh food exports see themselves affected by both lower prices and the Russian trade embargo. As for 'other', which includes consumer durables and non-durables, we have no additional comment to make.

Thing to keep in mind number 1: Many of those auto plant upgrades are to facilitate completely new models. Spanish auto production is slated to increase by 25 percent, to 3 million units, by the end of 2017.

Thing to keep in mind number 2: If this week's slightly incomprehensible equity market sell-off is somehow linked to those August EZ economic stats... well, maybe it will prove itself to be a little overdone.

Thing to keep in mind number 3: Spanish exports have recently shown an increased dependence on the euro zone, mainly at the expense of shipments to Latin America. The depth of a widely-predicted European slowdown will have a lot to say in the immediate future

Charles Butler, with contributions from Javier García Echegaray and José Domingo Rosello.