Spanish factory output plunges in July

Spain’s factories cut production by the biggest margin for 18 months in July, the latest crack to show in the fragile economy, official data showed on Thursday.

Output dropped 2.8 percent from activity a year earlier in July after smoothing out the impact of seasonal factors, the third straight month showing a decline, the National Statistics Institute said.

In the first seven months of 2011, industrial production is down 0.1 percent from a year earlier.

Lower factory output will weigh on the economy, still struggling to recover from the 2008 property bubble collapse, which also destroyed millions of jobs and has left the unemployment rate at more than 20 percent.

Spain’s economy showed feeble quarter-on-quarter growth rates of 0.4 percent in the first quarter of 2011 and 0.2 percent in the second quarter.

The government has forecast economic growth of 1.3 percent for the whole year, a target that is already looking optimistic to many.

BBVA Research predicts 2011 Spanish economic growth of 0.9 percent while both the Bank of Spain and New York-based rating agency Standard & Poor’s tip economic growth of 0.8 percent.

A breakdown of July’s figures showed Spanish production of durable items such as cars and washing machines plunged by 6.3 percent while output of non-durable items like food and fuel eased 0.6 percent.