Why Spain outperforms other developed markets

Part 5
Why Spain outperforms other developed markets (Part 5 of 8)

When will industrial production return to Spain?

Spain’s industrial production

Like consumer spending, industrial production is an important driver of economic growth that investors should track. Industrial production excluding construction decreased 2% year-over-year in August—the 24th straight month of declines. While the decline has slowed since 2012, production is unlikely to begin growing again any time soon.

Another way to look at industrial production is capacity utilization. At 76%, Spain is still off from the 2007 peak of 82% utilization. Utilization has been climbing over the last three quarters, even with overall production in decline.

2013 10 17 spain5Enlarge Graph

It’s not just Spain’s economy that matters for Spanish stocks

While Spanish production is still down, it’s important to keep the country in perspective. Spain uses the euro, so economic performance in the rest of the continent affects the country significantly. With Europe on the whole recovering, Spain should see a pickup over the next three years. Equities will price that future performance in long before it happens on the ground, however.

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