This document contains information on recent economic indicators and developments in Spain and globally: - Spanish industrial production declined in March, with drops in energy goods and durable goods production. Manufacturing PMIs increased slightly though remain in the contraction zone. Unit labor costs are forecast to increase modestly in 2019. - The US-China trade war escalated in May, with both sides increasing tariffs on more imports. This rising trade uncertainty could reduce global GDP growth by 2022 according to OECD estimates. Many US companies in China are reconsidering investments and relocating production. - Oil prices rose over 35% and 39% for Brent and WTI crude respectively since January due to OPEC extending production cuts

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2019*
EU 28 Spain
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4.8
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Industrial Production Index (left axis)
Manufacturing PMI (right axis)
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Slovenia
Estonia
Latvia
Lithuania
Slovakia
Ireland
Austria
Spain
Luxembourg
Finland
Malta
Netherlands
Belgium
Italy
France
UK
Portugal
Germany
Greece
RoA (left axis) EU RoA (left axis)
Efficiency ratio (right axis) EU efficiency ratio (right axis)
Average of
efficiency (EU)
Average of RoA (EU)
1 1
2 2
Industry Spain
In March, industry indicators exhibit a
downward trend year-on-year. Specifically:
• The Industrial Production Index (IPI)
dipped by 3.1% for the second consecutive
month, 2.9 pp more than in February. By
sector, the most noticeable drops occurred
in energy goods (-9.9%) and durable goods
(-5.8%), while capital goods (+0.5%) and
intermediate goods (+0.4%) report positive
rates year-on-year.
• The general Business Turnover Index (BTI)
grew moderately at a 1.4% rate, which is 1.9
pp less than in February, whereas the
increase in the energy sector (11.4%) stood
out.
• The New Orders Index experienced a
slower increase and stands at 2%, a whole
3.1 pp less than in February, and is mainly
backed by the energy sector (+11.5%).
In contrast, the sector's expectations
improve in April, with a manufacturing PMI
of 51.8, a growth of 0.9 points relative to the
previous month of March. It has remained in
an expansion zone while the Eurozone
continues in the contraction zone (<50
points).
Unit labour costs
Considering that the unit labour costs1
increased by 0.9% in 2018, the European
Commission forecasts a new increase of
1.9% in 2019, which is still slightly below the
EU-28 average (2.1%). This development
takes place in an environment where
productivity will hardly rise (0.1%).
Financial entities
The prospects of a global economic
slowdown, especially in the EU, and the
delay in monetary normalisation put
downward pressure on the operating
margins of financial institutions.
Particularly on profitability, which
hovers at around 0.6%, slightly above the
EU average (0.4%).
Similarly, their efficiency ratio (operating
expenses / gross margin ratio) remains
above the European average and has
improved since 2016 to 53.3% (55.7% in
2016) supported by the increase in gross
margin and curb in expenses.
Business…
at a glance May 2019
Source: Círculo de Empresarios based on European Commission and
Eurostat, 2019
Unit labor costs
YoY change (%)
v
Source: Círculo de Empresarios based on INE and Markit, 2019
Industrial Production Index (IPI) and Manufacturing PMI
YoY change (%) and points
v
Return and efficiency, Spanish financial entities
%
v
Source: Círculo de Empresarios based on Bank of Spain, 2019
2 Higher ratio implies lower efficiency
* European Commission Spring 2019 Economic Forecast
1 Unit labour costs include both wage costs and other concepts, of which,
Social Security contributions take the lion’s share. In Q4 2018, the monthly
labour cost per worker reached €2,692.52, 0.9% more than in the same
period of the previous year (INE)
1 Return on assets

2. ‘Business at a glance’, a publication of the Círculo de Empresarios produced by its Department of the Economy, contains information and opinion from reliable sources. However,
the Círculo de Empresarios does not guarantee its accuracy and does not take responsibility for any errors or omissions. This document is merely informative. As a result, the
Círculo de Empresarios is not responsible for any uses that may be made of the publication. The opinions and estimates of the Department can be modified without prior warning.
www.circulodeempresarios.org
-1,5
-1
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0
US GDP China GDP World GDP World trade Trade excluding
US and China
Higher uncertainty
Tariffs extended to the rest of US - China trade
Impact by 2021-22 from maintaining 25% tariffs
72.16
63.21
40
55
70
85
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Dec-18
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Brent
West Texas Intermediate (WTI)
+35.8%
+39%
US-China trade war
After the last tariff increase by the US,
currently, 40% of Chinese imports are taxed
at 25% ($250 billion). In turn, the Trump
Administration does not rule out imposing
tariffs on other imported goods (worth $539
billion in 2018), which would raise the
average US tariff above 7% (5 pp more than
in 2017).
As for China, it already imposes tariffs on
90% of its imports of US goods ($110
billion), and against this backdrop, has
announced that from 1 June it will increase
tariffs from 5% to 25% on US imports worth
$60 billion.
According to the OECD, the increase in
tariffs and the mounting uncertainty will
jeopardise GDP growth in both countries,
the US and China by -0.8 pp and -1.2 pp,
respectively, until 2022.
Uncertainty about US companies
According to the survey conducted by the
US Chamber of Commerce in China, 40% of
the US companies surveyed with presence
in the Asian country affirm that the
escalation of the Trump Administration’s
trade war will have a strong impact on its
trading volume, significantly more than on
its European counterparts. Moreover, 33%
are reconsidering their investment decisions
in China, and 20% are contemplating a
future relocation of their production outside
the Asian superpower.
OPEC meeting
After the last OPEC meeting held on 19 May,
in the wake of less than favourable outlook
for global growth and the upsurge in the
trade war, the oil-producing countries
announced their intention to uphold their
policy to cut daily barrels until the end of
2019. This environment, in addition to the
tensions between the US and Iran, has
boosted the price of Brent and West Texas
barrels to $72.16 and $63.2, respectively.
Thus, since January, the prices of Brent
crude and West Texas have reported an
increase of 35.8% and 39%, although they
are still below the record highs hit in
October 2018.
Oil prices
$ per barrell
Source: Círculo de Empresarios based on US Census Bureau and OECD, 2019
US-China trade war impact
%
v
250 325
Tariffs imposed
US tariffs on imports of China
$ bn
v
Chinese tariffs on imports of US
$ bn
110 10
Tariffs threatened
Tariffs imposed Tariffs threatened
Source: Círculo de Empresarios based on EIA, 2019