Activity slows as consumer prices continue to surge

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Latest figures conspire to depress economic sentiment.

4 January 2008

MADRID - After celebrating well over a decade of buoyant growth, a battery of figures released yesterday suggested the party for the Spanish economy may be over.

The increase in the number of jobless in December was the biggest in five years as a slowdown in the construction sector took its toll, while consumer confidence in November dropped to a new low. At the same time inflation ended last year at its highest level in over a decade.

According to Labour Ministry figures, the number of people out of work in the last month of 2007 increased by 35,074, or 1.6 percent, to 2.129 million.

The Ministry attributed the fall to the construction sector, which has been one of the main drivers of the economy, but is now having to come to terms with the end of a decade-long property boom. The number of jobless in the sector jumped by 12.8 percent, or 32,302. Unemployed also increased in industry and the services sector but by a significantly lesser amount.

The latest mortgage data from the National Statistics Institute confirmed the surge in the housing market is now a thing of the past. The number of property deals and the value of housing granted in October both dropped by over 5 percent, compared with the same month a year earlier.

According to figures released Wednesday, while new home prices rose on average by 5.1 percent, by the end of the year housing price inflation had slowed to only 1.1 percent. Meanwhile, figures released yesterday estimated that the price of existing homes dropped by between 0.3 and 1.1 percent in 2007.

Labour Minister Jésus Caldera hastened to fend off claims by some doomsayers that the Spanish economy is staring at a potential crisis. "The Spanish economy will grow more in 2008 than the average in Europe and more than the United States, but it won't grow as much as in 2007," he said.

The government expects GDP growth to slow to 3 percent this year from an estimated 3.8 percent last year, but multilateral agencies are less optimistic, as are consumers.

The consumer confidence index in December dropped to an all-time low of 72.3 points in December from 76.1 points in November as the credit crunch and higher interest rates and inflation eroded morale.

[Copyright El Pais / A. SIM 2008]

Subject: Spanish news

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