Spanish economy shows recovery signs: central bank

1st October 2009, Comments 0 comments

Spanish economy activity is contracting at a slower pace in the second quarter of this year than the previous quarter.

Madrid – Spain's recession-hit economy is showing signs of steadying, but recent improvements in consumer spending have faltered, the Bank of Spain said on Wednesday.

"The most recent indicators show an overall slowdown in the pace of decline of activity in the summer months," it said in its September bulletin.

"Economic activity continued to contract in the second quarter of 2009, albeit at a less intense pace than the first."

It said gross domestic product declined 1.1 percent in the second quarter from the first three months of the year, confirming figures released on 27 August by the National Statistics Institute. This was down from contraction of 1.6 percent in the previous quarter.

The industrial confidence indicator reached its highest level in 10 months in August, and car sales also improved due to a programme of government subsidies for new purchases introduced in May.

In the construction sector, once the engine of the country's economic growth, "contractionary trends continue moderating" and unemployment rose less sharply in August.

But the bank said consumer spending indicators show "an interruption in the improvement of earlier months." Retail sales fell by 5.2 percent in July "more sharply than in June".

Spain, which entered recession in late 2008, is taking longer to recover than some of its EU neighbours, such as France and Germany which both snapped a period of negative growth in the second quarter.

Its economy has proved especially vulnerable to the global credit crunch because growth relied heavily on credit-fuelled domestic demand and a property boom boosted by easy access to loans.

The government expects the Spanish economy, Europe's fifth biggest, will contract by 3.6 percent in 2009 and return to growth by the second half of next year.

But it forecasts the unemployment rate -- already the highest in the European Union -- will rise to 18.9 percent in 2010 after closing this year at 17.9 percent.

AFP / Expatica

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