Watch out Europe, Spain, once considered a troubled economic region mired deep in debt and unemployment, has become a relative powerhouse. While many economic indicators, most specifically unit labor costs, have led to relative prosperity, one indicator of economic prosperity lags: its stock market remains stagnant, an institutional multi-asset research piece from Source points out. However, this could change because the sector holding back stock prices is likely to get a lift.

Spain

Spain, once the “problem child,” has reduced its unit labor costs and economic numbers are robust

“The problem child that was Spain has turned into the dynamo of Europe, with growth far outstripping rivals,” the research piece, titled “The Spanish enigma,” points out.  Monitoring specific health barometers such as manufacturing PMI, a “robust” 53.6 in July, industrial production that was up 4.5 percent as of June and a 17 percent increase in housing transactions is highlighting economic signs of life. Even the nagging issue, unemployment, is showing signs of improvement. While still above 20 percent, the number of job seekers fell by 347,000 year over year basis July 2015. A trend is in place, it appears.

This all translates into higher general economic activity, as measured by Gross Domestic Product, which was up 1 percent in the second quarter. In fact the 3.1 percent year-over-year GDP gain in Spain was only bested by the headline economic performer in the region, Ireland.

How Spain overcame the economic malaise

Spain's problems in overcoming the recession hurdle of 2008-2009 were exacerbated by several factors the report, authored by Paul Jackson, head of research, Andras Vig, research associate, were multifold. Looking back at the current account trade deficit, which reached 10 percent of GDP by 2008, the loss of competitiveness is apparent. The productivity of the Spanish worker, measured by unit labor costs rose by 40 percent while German labor costs remained flat.