Spanish economy contracts less sharply in third quarterOctober 30th, 2009 - 2:37 pm ICT by IANS
Madrid, Oct 30 (EFE) Spain’s gross domestic product contracted again in the third quarter, although the decline relative to the previous quarter was just 0.4 percent compared with a drop of 1.1 percent in the April-June period, the central bank said.
The year-on-year decline also was not as pronounced, with the economy shrinking 4.1 percent in the third quarter relative to the same period last year, or slightly less than the 4.2 percent drop reported in the second quarter, Banco de Espana said Thursday in its latest economic bulletin.
The report said the country achieved its lowest quarterly GDP decline since the start of the recession last year thanks to the government’s multibillion-dollar stimulus measures, which have included boosting public-works spending and propping up the auto industry.
Banco de Espana warned, however, that the economy still shows significant signs of weakness, with employment continuing to decline - albeit at a slower rate - and private consumption and investment still falling.
At the same time, recession-inspired thrift and fears of joblessness have pushed the household savings rate to an historic high of 17.5 percent of disposable income.
The central bank said a drop in domestic demand and persistently weak demand for Spain’s exports, combined with tight credit markets and uncertainty over when the recovery will begin, continue to paralyse companies’ investment projects, noting that low interest rates thus far have been unable to offset those negative factors.
Additionally, demand for housing remains sluggish due to unemployment and the uncertainty it causes.
Net external demand once again cushioned the impact of the decline in domestic spending, although its share of overall GDP was down relative to the second quarter, the central bank said.
Though imports and exports both fell sharply year-on-year, the latter rose in the third quarter relative to the previous three-month period, while the former remained stable.
Banco de Espana, meanwhile, said that though employment declined by more than 7 percent year-on-year, the unemployment rate stabilised in the third quarter at 17.9 percent of the labour force at the end of the third quarter.
Spain, which officially entered into recession in the last quarter of 2008, has been battered by the global financial crisis and the end of a construction-industry-led boom, and its unemployment rate currently stands at twice the average for the euro zone.
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Tags: auto industry, banco de españa, credit markets, disposable income, domestic spending, economic bulletin, efe, gross domestic product, household savings rate, imports and exports, investment projects, joblessness, low interest rates, multibillion dollar, negative factors, private consumption, quarterly gdp, recession, spanish economy, tight credit