“The worst has passed in terms of consumption, but recovery will be slow”

 In the case of the former, Inditex announced a return to profit in the second quarter, which could be an early indicator of recovery for consumption. However, in an interview with A Media Sesión on Radio Intereconomía, Alberto Matellán, Chief Economist at MAPFRE Inversión, pointed out that although the indicator itself is positive, it should be taken with a pinch of salt. In this sense, he said “let’s not forget that Spain depends very much on small trade and hospitality.” Even so, if you look at high-frequency data, such as mobility or hotel reservations, everything is moving in the same direction, said Matellán, showing that “the worst has passed in terms of consumption.” Despite this, “recovery will be slow,” he added.

On the macroeconomic side, the Central Bank of Spain downgraded its forecasts this week, already dismissing an “early recovery scenario” in the third and fourth quarters of this year. To be precise, it forecasts that the Spanish economy could register a fall of between 10.5 percent and 12.6 percent for the whole year in the worst case scenario epidemiologically, while downgrading its growth forecast for 2021, predicting a recovery of between 4.1 percent and 7.3 percent. Matellán recalled that most analysts agree with these forecasts and that there has been little change in the average estimates. In fact, he considers it to be positive that the range of current forecasts has narrowed compared to that seen before the summer, because it reduces uncertainty and is therefore good news for investors. “Euphoria was rife post lockdown, but we have had a wake-up call with the reality that recovery will be slow and difficult in three areas: employment, corporate profits and confidence.”

With regard to the business sectors that could contribute the most to GDP next year, Matellán indicated that it is not easy to change a country’s industrial structure in just one fiscal year, so no major change is expected. However, although the business landscape remains largely unaltered in terms of its makeup by sector, the fact that each sector is adapting is very positive. “Companies will adapt faster than anticipated, which is positive. And this will allow recovery in one of those areas — corporate profits,” added the expert.

Alberto Matellán does not believe that the Fed meeting will have much effect on the market. He hopes that, from now on, it will incorporate each macro variable in line with its assessment, that is, greater concern for inflation will not influence decisions, “which is a considerable change.” However, the Fed could commit to prolonging the low-rate scenario, which would have an effect on bonds and, in particular, on flattening the curve.