Business owners’ optimism about the potential of the Spanish economy is now as high as it has ever been in the last seven years.
After the second half of 2013 yielded better results than many experts had initially forecast, company executives are now convinced that 2014 will be the year of the economic recovery after a long desert crossing.
The most widely accepted opinion is that this year will see GDP growth, and that this will mean improved turnover and higher profits for many businesses.
But the one indicator that seems to be dragging its feet is job creation. Even though companies are confident their profits will rise this year, their human resources departments will continue to act conservatively, preferring to keep staff at current sizes and hiring temporary workers if necessary. Thus, the labor market is not expected to experience a recovery before 2015.
A quarter of those surveyed beleive there will be no receovery until 2006
These are the main conclusions of the Business Barometer for the second half of 2013. The survey has been conducted periodically for EL PAÍS by Deloitte since 1999, and this time the consulting firm canvased a record 329 businesses representing all economic sectors, with a joint turnover of over a billion euros and over a million employees combined.
Asked when Spain will experience economic recovery, 42 percent of respondents said that it would come in 2014, while 21 percent said it would not arrive before the first half of 2015 and 12 percent pushed it back to the second half of 2015. A quarter of the companies surveyed thought there would be no recovery at all until 2016.
Most entrepreneurs - 69 percent - think that GDP will be among the first economic indicators to post improvements this year. As for investment, opinion is more divided, with 43 percent expecting a greater flow of funds this year, 40 percent delaying it until 2015 and 17 percent expecting nothing until 2016.
Attitudes are less optimistic when it comes to employment: only 31 percent of those polled expect to see job creation in 2014, while 38 percent point at 2015 and 31 percent doubt the labor market will improve before 2016.
From a corporate point of view, the best-performing indicator during the second half of 2013 was production/turnover, which reached the highest levels since the first half of 2008. The number of businesses that saw increased sales represented 48 percent of respondents, compared with 31 percent in the previous survey, and far above initial forecasts of growth for just 39 percent of companies.
The main reasons for this improvement, according to business leaders, were greater domestic demand, seasonality and growing exports. Forecasts for the first half of 2014 maintain the positive trend: 47 percent of respondents figure that their turnover will continue to improve, while 36 percent expect to remain stationary and 17 percent are bracing themselves for a drop.
The industry sectors that seem to be most optimistic about their own growth prospects this year are technology - where nobody expected lower turnover in the first half of the year - transportation and logistics, and banking and finance.
Based on company size, there is greater optimism among the larger groups, those with revenues of 300 to 600 million euros (55 percent of these expect to see growing sales), while companies with a turnover of 60 to 150 million euros were less upbeat.
There was nearly unanimous agreement (98 percent) that tourism receipts will experience the greatest growth, followed by vehicle registration (74 percent).
Although sales are starting to improve already, the upturn in profits began in the previous period, thanks on the whole to increased savings. The new Barometer confirms this trend: 59 percent of respondents improved their profits in 2013, while 31 percent experienced a decrease and 10 percent remained stationary.
Earnings forecasts for the first half of 2014 are even more optimistic, since 65 percent of businesses polled said they expected their profits to grow and only 21 percent expected a drop.
How much will earnings before taxes grow? The most generalized reply (32 percent) was between zero and five percent; 17 percent said they expected an uptick of five to 10 percent, while 16 percent forecast double-digit growth.
The most optimistic sectors in terms of rising profits this year were, in order, the banking and finance sector, manufacturing, services and consulting, and consumer goods.
The improved economic context is also beginning to be felt in investment: 51 percent of companies reported greater investment in the second half of 2013, while 28 percent maintained similar levels and 21 percent reduced it. Investment forecasts to June 2014 are even better, with 60 percent of respondents saying they will invest more, 26 percent expecting to maintain the same level of investment and 17 percent planning to reduce it.
As for the impact that increased investment will have in the various business areas during 2014, there are a few changes from the previous survey. Entrepreneurs were mostly optimistic about investment in expanding the business (58 percent). The second spot went to production and new technologies (48 percent in both cases). Fully 100 percent of services and consulting firms said they expected to invest more this year, followed by banking and finance, and transportation and logistics.
The Barometer affords a double view of the labor market. On one hand, it would seem to show that the rate of layoffs has finally reached its ceiling; on the other hand, hiring prospects are low, making for very high jobless rates for a long time to come and temporary jobs as the main option for job seekers.
In the second half of 2013, the percentage of companies that maintained their staff unchanged was 41 percent, higher than the 37 percent who fired workers and the 22 percent who hired new personnel. As for future prospects, the forecasts point to 56 percent of businesses aiming to keep the same number of workers on the payrolls in the first six months of 2014, while only 27 percent figure they will lay people off.
A significant figure to come out of the survey is the 19 percent of companies who plan to hire temporary workers, when back in 2013 this policy was only supported by 10 percent of those surveyed, according to the Barometer.
Again, technology emerges as the most optimistic sector in terms of job prospects: 60 percent of tech executives believe hiring will improve. They are followed by the energy and resources sector (31 percent) and services and consulting (30 percent).
The most pessimistic sectors are construction and contracting - where 50 percent of respondents believe jobs will be cut - followed by education and official agencies (50 percent), and health and pharmacy (38 percent).
The manna of exports
There are two sides to the policy of workforce and wage austerity implemented at many companies. On the one hand, this kind of regime improves productivity and the competitiveness of the products and services sold abroad by Spanish companies.
But on the other, it brings the feared spiral of deflation closer by depressing domestic consumption.
In the present context, the businesses that participated in the Barometer survey are turning to exports as their ticket to salvation. The role of foreign sales on total turnover for 2013 was very significant, representing over 30 percent of total revenues for 38 percent of respondents. Only 30 percent of those surveyed said they had had no exports whatsoever during the year.
The manufacturing sector exported the most in 2013, representing 68 percent of all sales, followed by construction at 49 percent and transportation and logistics at 46 percent. At the other end of the spectrum, technology, energy, natural resources and distribution are more focused on the internal market.
The dependency on exports will continue in 2014, the survey shows. Around 55 percent of company executives expect to see exports rise this year, while 36 percent feel that they will remain at similar levels to last year, and nine percent figure they will go down.
Broken down by export areas, Spanish companies are selling mostly to Western Europe - 85 percent of respondents said they had exposure to this region - followed by Latin America, North America, Africa, Eastern Europe, Asia and Oceania.
By size, the larger companies are also the biggest exporters.