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Business activity was heading down the hill as early as 2019, according to the Bank of Spain

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The activity of non-financial corporations lost dynamism in 2019, which translated into slowdown in job creation. However, the high inflow of dividends favored an increase in ordinary profits and with it also increased the average levels of profitability. This is reflected in the results of non-financial companies published this Monday by the Bank of Spain.

Specifically, the information corresponds to the fourth quarter of 2019 as well as an advance at the end of last year. As for employment, it slowed down, reducing its growth rate to 0.8%, which is 0.6 percentage points less than a year earlier. The increase in the number of workers was mainly driven by the progress in hiring permanent staff, which rose 1.4%, while temporary employment fell 1.7%.

In 2019, the percentage of companies that created jobs stood at 51.4%, slightly below the previous year's figure (51.7%), although it remained clearly higher than the proportion of companies that destroyed jobs, which was 33.4%.

In 2019, the percentage of companies that created jobs stood at 51.4%, slightly below the previous year's figure

The sectoral detail shows that employment growth was concentrated in the services branches, with increases of 2% in commerce and hospitality, 0.9% in information and communications, and 0.8% in the branch that encompasses the rest of the activities. Conversely, the energy sector registered a decrease in its workforce averages of 1.9%, while in the industrial sector employment fell by 0.3%.

Average wages experienced a new upswing in 2019, increasing 2%, half a point more than a year earlier. This acceleration was observed in a generalized way in almost all sectors, except for commerce and hospitality, which was the only one in which average wages grew less than the previous year (1.6%, compared to 2.9 % of 2018). In the rest of the branches, salary increases were highers: they ranged from 1.9% in the information and communications sector to 2.9% in the energy sector, in all cases these increases being higher than those of the previous year.

On the other hand, financial income grew strongly in 2019, by 21.2%, mainly driven by the increase in dividends received (24%), although interest income also grew, although to a lesser extent, by 5.1%. On the other hand, financial expenses continued to fall, 4.9% in this case, mainly due to lower average financing costs, an effect that was partially offset by the higher volume of debt of the companies in the sample in the year as a whole.

The advance of ordinary profits allowed the aggregate profitability ratios to grow in 2019, seven tenths that of assets and one point and two tenths that of own resources, standing at 7.2% and 11%, respectively. However, the median values ​​of these indicators reflect a decrease both in the case of asset profitability (it fell three tenths, to 5.6%) and in the profitability of own resources, which went from 8, 3% to 8%.

The average cost of external financing continued its downward trend and fell two tenths in 2019, to 2%. The increase in the profitability of the asset, together with the decrease in financing costs, caused the differential to widen again between both ratios, up to 5.1 percentage points, eight tenths more than the previous year.

The data stands out in a context where commercial activity contracted moderately, which was reflected in a decrease of 1.5% in turnover. The reduction in sales affected to a greater extent those made in Spain, which lost some relative weight in favor of exports.

Purchases also decreased in 2019, 2.2%, being this steeper decline in the case of imports, which went from accounting for 33.1% of total acquisitions in 2018 to representing 30.9% in 2019. In line with these developments, the balances of customers and suppliers decreased, which were also conditioned by a further reduction of average collection periods, while payment periods increased slightly.

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