Odious Comparisons I - The exact end of economic crisis in Spain

The current economic crisis greatly concerns the most of us. That's why it seems that every day signs of recovery are searched for, no matter where, as if we expected the desired discharge from a nasty disease.

The root causes and its consequences are no doubt complex, making it very difficult for us to know what measures will relieve us from it, and if they do, when  will that happen. Nevertheless, the urgency is great, and this urgency forces us to seek signs of change under the stones.

Exciting data emerged a few days ago in Spain, which were given considerable publicity, namely that the Spanish GDP quarterly change had become positive (one quarter GDP had grown compared to the previous quarter by an estimated 0.1%, instead of decreasing). With this in mind, we could claim being technically out of recession (a period in which economic activity declines in a country).

Numerous comments and discussions went on in the media based on this information, as if the sign change of the indicator was a lighthouse that enlightens us with the promise of land. Why all the fuss, I wonder? Now, if we ignore the fact that GDP continues to be only an indicator; important, yes, but one indicator, and even if we trust it as a good summary of the present status, we should wonder if it has the surgical precision that some pretend it has. At the end of the day, the GDP is measured during a period of time, which may vary according to the criteria. Are three months enough, or are three years? Before I ramble on strong downturns to mild recessions in the economy, let us see a graphic example of this.

If we look at the quarter GDP compared to the same quarter last year, we see that it is still decreasing (we have not exceeded that of last year). The variation trend is increasing, yes, but still less than zero. So, have we come out of recession? Do technicalities have something to say?

Let’s compare with two years ago:

But look at this! If we take more time perspective, the situation seems worse (the trend is negative, and decreasing).

Even so, if we take as reference the rate of change in five years, it appears that there would be no cause for alarm, since the increase in GDP compared to that of five years ago is still positive (though growing at a slower pace). That is to say, the bump in which we currently are, has not yet led us to a state of things in terms of productivity equivalent to that of five years ago.

My point is, why bother looking so much in detail to certain data, which ultimately lends itself to multiple interpretations? Why do we get dizzy with such technicalities? If it was not that the economy is as much psychological as factual, I would say that we waist the time. Do you want a bit more aseptic data? Here it is.

Do you think we have definitely emerged from recession? Do you think the crisis is ending? Hard to say, right? I do not know whether, if that happens, when it will be. But I think it was not too a helpful statement the one made in the news, or the liters of saliva discharged afterwards... One thing I have it clear: as the one spanish saying goes, “not for very early, early dawn.”