Spanish economy trundles on in fourth quarter

Thu Feb 27, 2014 7:48am EST
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By Paul Day

MADRID (Reuters) - Spain's economy grew between October and December as domestic demand and investments improved, data showed, adding to signs that its recovery from recession is slowly gaining traction.

Gross Domestic Product (GDP) expanded by 0.2 percent in the fourth quarter from the third, its second quarterly expansion in a row, Thursday's final National Statistics Institute (INE) data showed. The economy contracted 0.2 percent year-on-year.

Both figures were below INE estimates given earlier this year of a 0.3 percent quarterly expansion and a 0.1 percent annual drop, though analysts played down the growth gap.

"There's been a small downward revision, but it doesn't change the overall picture dramatically," said Silvio Peruzzo, economist at Nomura.

"The recovery is clearly on track and accelerating with investment and consumer demand improving."

In Spain, domestic demand is worth around two thirds of output and, after a burst property bubble in 2008 left millions out of work, has been a heavy drag on the economy as both consumers and businesses reined in spending.

The economy shrank 1.2 percent in 2013 from a year earlier, its fourth annual contraction in five years and cutting its overall worth to 1.023 trillion euros ($1.40 trillion) - the lowest figure since 2006.

In the fourth quarter, domestic demand had a negative drag on GDP of 0.6 percentage points compared to 2.5 percentage points a quarter earlier. Exports lifted GDP by 0.4 percentage points, down from 1 percent a quarter earlier.   Continued...

A man searches for food in a garbage container along a street, with the Four Towers business district pictured in the background, in Tetuan, Madrid, January 28, 2014. REUTERS/Susana Vera