Spain's GDP Contracts As Investors Wait For US GDP Second Quarter Revisions And Indications From The Fed

Tuesday, August 28, 2012 07:29
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Spain's GDP Contracts As Investors Wait For US GDP Second Quarter Revisions And Indications From The Fed

Tags: economy | European crisis | Federal Reserve

The revised report gross domestic product (GDP) in the US is due out on Tuesday, August 28.
 
Most investors are expecting to see an improvement in the revised GDP report, indicating growth in the US economy. They’re also expecting to hear clearer direction from the Fed about any stimulus action it may be considering.

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There was no good news, however, in the GDP report for Spain that showed GDP fell .4% from the previous quarter, which had declined .3%. Despite the slowdown in GDP, the costs of borrowing for the country fell to its lowest point in three months.
 
The easier credit stems from hopes that, instead of simply imposing strict austerity measures, Europe’s central bank (ECB) will finalize an agreement to provide critically needed stimulus for Eurozone countries in distress.
 
Spain’s recession is only expected to grow worse. Prime Minister Mariano Rajoy has stopped forecasting that Spain’s economy would get back on a growth path before 2013. His budget for 2013 incorporates austerity measures to as much as 15% of the country’s GDP by 2014.
 
Coupled with high unemployment, that’s a recipe for a more protracted recession, not toward renewed growth. Spain’s economy grew only .4% last year, down from an expected growth rate of .7%. In 2010, it contracted .3%, down from an expected contraction of .1%.

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