Spain: Weak retail sales in October while Spain prepares for Catalan elections - ING

Steven Trypsteen, Research Analyst at ING, explains that retail sales in Spain fell for the first time since July 2014 and the figures for the Catalan region show a sharp drop.

Key Quotes

“Meanwhile, some separatists have abandoned the unilateral declaration for independence and call for talks with Madrid.”

“Retail sales (calendar adjusted) dropped by 0.1% in October compared with a year ago. In September sales increased by 1.6%. The main culprit is the Catalan region with a sharp drop in retail sales.”

“Out of the 17 autonomous regions, retail sales for Catalonia dropped the most. The unadjusted series fell by 3.9%. Alongside Madrid, where retail sales growth was flat, Catalonia weighs heavily in the index.”

“Meanwhile, the immediate threat of a unilateral declaration of independence seems to have disappeared. A number of separatist politicians said that for the time being they would refrain from a unilateral declaration of independence. Instead, they called for talks with Madrid. The elections in Catalonia, to be held on 21 December, could therefore be a catalyst that could lead to a more long-term solution for the crisis. Abandoning independence by separatists will allow the central government to take a seat at the negotiating table after the elections. This permits finding a negotiated solution and not a confrontational one.”

“According to the latest polls there are no big shifts in the political landscape in Catalonia. The unionists and the separatists get approximately the same amount of votes. The ERC (pro-independent) party would get the most votes (26%), followed by two unionist parties Citizens (20%) and the Socialists’ party of Catalonia (15%). Carles Puigdemont’s party, PDeCat, is the fourth largest (14%). Of course, these polls should be interpreted with caution.”

“The economic impact of the elections will of course depend on the results. For now, our base case is that there will be a negotiated solution after the elections. This will take time, but as long as there is progress in finding a solution, we think the economic impact will be limited.”