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The Treasury detects a sudden slowdown in economic activity in December due to the 'Omicron effect'

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A new activity indicator just released by The Tax Agency has come to launch the first early warning on the impact of the Omicron variant on the Spanish economy. A small 'spoiler': the news it brings is not good.

The indicator in question – which follows the fashion of the new high-frequency indices built to permanently monitor economic activity– aims to offer a snapshot of the pulse of activity in Spain from the daily information that companies transmit to the Tax Agency within the framework of the Immediate Supply of VAT Information system, through which tens of thousands of companies and freelancers automatically register and report the invoices they issue to the Treasury.

The data obtained by this channel, recently published by the Ministry of Finance, reveal an abrupt halt in the turnover of companies in almost all sectors of the activity since the beginning of December, which becomes a collapse in the case of retail, construction and hospitality, once again the segments most affected by the tumbles that are ndo the irregular domestic economic recovery.

Anatomy of another 'halt' in the recovery

The report compares the sales reported in the last bars of 2020 with those of the last section of 2021 and reveals that while at the end of November the improvement in sales Compared to a year before, it was 28%, showing vigor compatible with the reactivation of a good part of the business fabric and the return of the economy to growth rates, from At the beginning of December, this percentage has done nothing but decrease , emitting clear signs of deterioration, in line with the increase in infections by the Ómicron variant in Spain.

The weekly measurement provided by the indicator allows full traceability of the slowdown in company sales. In the first week of December, that strong improvement in sales compared to the toughest year of the pandemic had already softened to 27.1%; a week later that increase was already only 25.3%; and by the third week that rate had already dropped to 24.3%. Four points of fall in three weeks.

The seriousness of the situation is especially appreciated in certain segments . The hospitality industry, encouraged by the remission of the virus, the absence of restrictions and the reopening of a large part of the installed capacity that remained hibernated during 2020, had been showing an improvement in turnover in November 2021 compared to the same period of the previous year of 168 %. In just three weeks in December that rate of improvement plummeted to 82%. It should be remembered here that hospitality sales in the final stretch of 2021 compete with those of a year in which most of the autonomous communities maintained opening and hour restrictions for the sector.

Retail trade, also especially exposed to the impact of fear of contagion, has gone from presenting sales improvement figures of 20% to moving by 11% in about 20 days, according to data from the Tax Agency.

More sales than before the pandemic

The 'Omicron effect' has ruined the premiere of an indicator that came to shore up the government story that the Spanish economy is already operating at the same rate at the that it did before the pandemic, even though the Gross Domestic Product that existed before the outbreak of Covid-19 has not yet recovered.

The information provided by the billing declared by the companies in their declarations VAT actions through the Immediate Provision of Information shows that since last August the amount of daily sales of companies has been above that registered in the year before the pandemic, 2019.

In November 2021 – the last month for which official data is available – the daily turnover detected by the Treasury databases was 3,472 million euros, 33% above the 2,609 million registered in November 2020 – when the economy was still in rebound mode – and also well above the 2,833 million euros that were registered in 2019 in this same source.

The billing data for November is 'contaminated' by the effect of inflation, since the level The current price of prices is seven points higher than it was in 2019 , but beyond this effect, which the report does not measure, a significant recovery in sales is shown.

The Tax Agency underlines, in fact, that the average daily sales between January and November 2021 was 2,811 million euros, which is 2.1% above that registered in the same period of 2019. It also clarifies that despite this there are sectors such as hospitality or automobile manufacturing that still move below the billing levels accredited then.

The database from which the Tax Agency report starts is made up of just 60,000 companies with a level of of income of more than six million euros per year, but its turnover accounts for more than two-thirds of the total domestic sales produced in Spain.

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