Industry sees best foreign investment figures since 2005

BarcelonaThe crisis has made the priorities of European countries do an about-face. Industry, often ignored and underestimated during the years before the crisis, has proved that it can withstand the vicissitudes of the economy better. Governments are determined to reindustrialize their economies, though not in an equal way. Catalonia is among those that are having success in recovering a leading role for industry. Two pieces of information suggest that much: the first is that industry was the only large sector that contributed positively to economic growth in 2013; the second is that the boom in foreign investment that Catalonia saw last year was focused primarily on industrial manufacturing, which saw the best investment figures in the last decade.

According to information released yesterday by the Barcelona Chamber of Commerce, last year 39% of the total foreign investment in Catalonia went to industry (1,365 million euros). 2013 was the second year with increased foreign investment here, but the doubt was if this was due to "good" investments or, rather to an increase in the number of real estate operations, such as the sale of buildings owned by the Catalan government. The Chamber's report revealed the predominance of the former: coming second after industry, the sector that received the most investment was information and telecommunications, which achieved 13% of the total.

A new productive model?

Yesterday Miquel Valls, president of the Chamber of Commerce, stated that "the investments are being made in sectors that could change the model [of the Catalan economy]". Mr Valls is convinced that the data "are predicting a change in the productive model".

This phenomenon cannot be seen, however, in the rest of Spain, where "foreign investment appears to be oriented towards maintaining the pre-crisis model", said Mr Valls. In fact, the sectors showing the most foreign investment in Spain (excluding Catalonia) were sporting and recreational activities, financial services, transport, and real estate business.

The weight of industry in the Catalan economy fell dramatically in only a decade: in 2000 it generated 27% of gross value added, but only 18% in 2010.

This trend could be starting to reverse, with the data offered yesterday by the Chamber: last year, the value added generated by industry grew by 0.8% while the rest of the sectors (services, agriculture, and construction) all dropped to some extent. Indeed, this rise in industry stands in contrast to what was seen in Madrid, the Basque Country, the whole of Spain and even in the European Union. In all these areas, the weight of industrial manufacturing fell.

Exports, growth, and deficit

This growth in industry should allow for an acceleration in exports, which, after having grown strongly since the beginning of the crisis, stalled last year and only grew by 1%. In any case, Joan Ramon Rovira, head of the Chamber's research service, is "convinced that exports will continue to grow strongly". Rovira attributed last year's stagnation to the slowdown in the European economy, but assured that exports would "regain momentum again".

Indeed, the Chamber of Commerce predicts that exports will grow by almost 5.9% this year and 5.6% in 2015. Imports will also grow thanks to a recovery in consumption, but not by as much as exports (see graph). For the economy as a whole, the forecast from the group led by Rovira is that the Catalan GDP will grow by 1.2% this year -that's 0.3 points lower than the Catalan government's own forecast- and by 1.5% in 2015.

Miquel Valls took advantage of the opportunity yesterday to give qualified support to the umpteenth battle between Barcelona and Madrid over the deficit ceiling, after Spain's Finance Minister, Cristóbal Montoro, refused again this week to relax the targets for the autonomous communities. "We support a fairer distribution of the deficit" -said Mr Valls- "as long as it is focused on productive investment and not to increase certain expenses". The president of the Chamber asserted that the Catalan Government could still simplify its administration and make an effort to "rationalize expenditures". That is to say, if it were just to bring back the extra paycheck for civil servants, it does not appear that the Chamber would be willing to fight for it.

Treasury sells ten-year bonds at the lowest yield ever

The Spanish Treasury yesterday put 3,530 million euros in bonds and obligations of five and ten years on the market at the lowest rates in history. Even ten-year bonds were offered at a rate below 3%. In total 3,530.27 million euros were sold, exceeding the target amount, which was between 2,500 and 3,500 million. The total demand, however, was below the April auction. Nevertheless, it came to just under 6,300 million euros. 1,536.79 million euros in 5-year bonds were sold, with a demand 1.9 times higher than what was sold, and with a coupon of 2.75%. The yield offered was a new low at 1.648% (in April it was 1.663%). Additionally, 1,993.48 million in 10-year bonds were sold at an average yield of 2.968%.