Spanish economy grows at fastest pace since 2007

Laure Fillon
Cranes stand idle at an empty shipyard in Vigo due to a loss of orders on April 27, 2012
Cranes stand idle at an empty shipyard in Vigo due to a loss of orders on April 27, 2012 (AFP Photo/Miguel Riopa)

Madrid (AFP) - Spain's economy posted its strongest quarterly expansion since 2007 between April and June due to stronger domestic demand, official data showed Thursday, in a further sign of recovery from recession.

The Spanish economy, the eurozone's fourth-biggest, grew by 0.6 percent in the second quarter compared with the previous three months, the National Statistics Institute (NSI) said, confirming its preliminary estimate.

The promising data came on the same day the NSI said inflation fell by 0.5 percent in August -- the biggest dip in consumer prices since 2009 -- prompting fears that Spain may struggle to head off deflation.

Year on year the economy grew by 1.2 percent, following four consecutive quarters of expansion, the NSI said.

The quarterly growth figures marked an acceleration from growth of 0.4 percent in the first quarter.

It was Spain's best quarterly growth figure since the final three-month period of 2007, when the economy grew by 0.7 percent.

The institute added that the level of employment grew by 0.8 percent compared to a year earlier, with 127,000 jobs created.

The government said that represented the first annual net job creation since 2008, the year the financial crisis started.

Spain's overall unemployment rate is still extremely high, however, at nearly 24.5 percent according to the latest official figure.

Prime Minister Mariano Rajoy said earlier this month that the economy was recovering "better than expected" and was now among Europe's best performers.

"We are registering healthy and diversified growth which is here to stay," he said.

"In less than two years we have gone from being an economy on the brink of a bailout to being one of the economies that is growing the most in Europe."

- Job creation -

The government has said it will likely raise its growth forecast for this year to 1.5 percent, up from a previous estimate of 1.2 percent, and possibly to 2.0 percent next year, up from 1.9 percent.

Growth in the second quarter was fuelled by a rise in household spending, which expanded by 0.7 percent from the previous quarter, when it grew 0.5 percent, the statistics office said.

External demand, which had helped prop up the economy, fell by 0.7 percent however, due to a fall in exports as growth cooled in many of Spain's main European trading partners.

Spain emerged in the second half of 2013 from its second recession since 2008 when a labour-intensive property bubble burst, crippling the economy and throwing millions of people out of work.

The country faced pressure to seek a full financial bailout from the eurozone in 2012. In the end it received 41 billion euros ($55 billion) to rescue its banks.

The latest unemployment data showed the jobless rate edged below 25.0 percent in April-June for the first time since the third quarter of 2012.

But at 24.47 percent, it remains the second-highest jobless rate in the eurozone after Greece and one of the highest in the industrialised world.

Employment Minister Fatima Banez said in a statement on Thursday that achieving net annual job creation with economic growth of 1.2 percent was a sign of "the solidness of the recovery" under way in Spain.

Previously Spain had needed growth of at least two percent to create jobs, the statement said.