Ode to the missing envelopes...

If you look at income statistics, things are not so bleak in Spain. Wages are falling only a bit; GDP will contract by, maybe, 2-3% this year. And then you come across statistics like this one (hat tip to marketwatch). Retail sales in Spain are falling at a rate of 10% yoy. What is going on? Partly, precautionary savings. Partly, incomes are falling much faster than measured - in the boom, the black economy grew much more than the official one, and it is all those extra payments (in little envelopes) that companies used to make that are disappearing at a fast rate. In boom times, countries love to add the black economy to their GDP statistics. If we captured how quickly it is shrivelling now, GDP growth in Spain for this year would look a lot bleaker...