Mish's Global Economic Trend Analysis

---

Birth-Death Model in Spain: 391,000 companies closed, 334,500 New Businesses Launched; Spain Lost 57,000 Companies in 2011 Posted: 07 Aug 2012 11:25 AM PDT Inquiring minds are looking at the birth-death model of Spanish businesses. Statistics show Spain Lost 57,000 Companies in 2011 The number of active enterprises decreased 1.6% in 2011 and stood at 3,199,616. This is the fourth consecutive year of decline according to the latest update of the Central Companies Directory (CCD) released by the National Institute of Statistics (INE). During 2011 more companies ceased their activities (391,270) than were launched (334,516). The net effect is a loss of 56,754 businesses. By size, measured in number of employees, Spanish firms are characterized by their small size. 55.2% of companies (1,764,987)  did not employ any workers in 2011. In addition, 867,550 companies (27.1%) had one or two employees, while those hired 20 or more workers accounted for only 4.7% of businesses. The fewest casualties were in education (2682), the utilities (1,478), recreation and entertainment (859), and sector programming and computer consulting (828). By contrast, construction of buildings had 13,206 net company closures, followed by specialized construction (10,170) and architectural and engineering (7343). Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Italy Industrial Production Plunges 8.2% YoY, GDP Declines 2.5% Annualized; Italy to Pay Civil Servants 80% of Their Salary to Do Nothing Posted: 07 Aug 2012 07:35 AM PDT News in the eurozone's third largest economy is once again on the dismal side. Italian Industrial Production Plunged more than expected as did GDP. Italian industrial production declined more than forecast in June, signaling the euro region's third-biggest economy probably contracted for a fourth quarter. Economists forecast a decline of 1 percent, according to the median of 16 estimates in a Bloomberg News survey. Production fell 8.2 percent from a year ago on a workday-adjusted basis. Italian business confidence declined last month more than economists forecast as executives became more concerned that the country's economic recession will deepen in coming months. Fiat SpA (F) temporarily stopped new investments in Italy as the European debt crisis caused sales in the region to plunge. Italian car sales have plummeted 20 percent through July, with deliveries this year on track to slip to the lowest level since 1979. Italy to Pay Civil Servants 80% of Their Salary to Do Nothing To plug the rising deficit gap, Prime Minister Mario Monti approved Deep Cuts in National Spending (a needed measure but not how they went about it), and also hike the VAT by 2% (economic insanity in a deepening recession). Italy's government has agreed to cut spending by 26bn euros (£21bn, $32bn) over the next three years to plug the gap between spending and income. Staffing levels will be assessed by October. Some workers will be sent home for two years on 80% of their salary before losing their jobs or being retired. The package means the country will not now need to bring in an unpopular increase of 2% in value added tax (VAT) and will be able to funnel 2bn euros to the Emilia Romagna region, which was hit by two earthquakes in May. The cost of servicing Italy's debt increased by 16% to 18.7bn euros, up from 16.2bn euros in the first quarter of 2011. Italy Recession Lingers for Year The official estimate for decline in GDP this year was -1.2% (revised lower from about half that). Prepare for another downward revision as Italy's Recession Pain Deepens. Italy shrank further into recession in the second quarter for a 2.5 percent yearly decline, data showed on Tuesday, threatening attempts by Mario Monti's technocrat government to control a debt crisis that is undermining the whole euro zone. A 0.7 percent fall in gross domestic product, only slightly better than the first quarter's 0.8 percent decline, means the Group of Seven economy has now been contracting for at least a year, according to figures from government agency ISTAT. This will weaken tax revenues and hit jobs and consumer spending, a vicious circle which makes it harder for Monti, who is aiming to cut the budget deficit to 0.1 percent of GDP in 2014, to meet his public finance goals. A Reuters survey of analysts last month forecast that the budget deficit this year would be 2.3 percent of GDP, compared with Monti's 1.7 percent target, and 1.3 percent in 2013, when the government forecasts a 0.5 percent shortfall. ISTAT gave no numerical breakdown of GDP components with its preliminary estimate, saying only that activity contracted in agriculture, industry and services. ISTAT said so-called "acquired growth" at the end of the first quarter stood at -1.9 percent. This means that if GDP posts flat quarterly readings in the final two quarters of 2012, over the whole year it will be down 1.9 percent from the previous year. Expect Debt-to-GDP to Rise Italy's debt-to-GDP ratio is 123%. Given rising borrowing costs and shrinking GDP, that number is going to go up, perhaps substantially. Eurosceptic Government in 2013 What Italy needs is work rule reform, pension reform, a dramatically smaller government, and lower taxes. As with Spain, work rule and pension reform is very slow in coming but tax hikes have been plentiful, exactly the wrong approach. A eurosceptic government may be on the way next year as Mario Monti will step down in April. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

You are subscribed to email updates from Mish's Global Economic Trend Analysis To stop receiving these emails, you may unsubscribe now.	Email delivery powered by Google
Google Inc., 20 West Kinzie, Chicago IL USA 60610