Spanish economy slows as global demand eases

Spain's economic recovery began to run out of steam in the second quarter of the year as the government's austerity drive drove down public spending and as the pace of export growth slowed.

The National Statistics Institute (INE) on Friday said GDP growth on a quarterly basis slowed to 0.2 percent in the period April-June from 0.4 percent the previous three month and decelerated on annual basis by the same amount to 0.7 percent.

The second-quarter figures were in line with earlier flashes estimates by the INE. However, the first-quarter year-on-year and quarterly figures were revised upward by 0.1 percentage points, highlighting the extent of the slowdown in the latest reporting period.

The negative contribution of domestic demand increased from 0.4 percentage points to 1.9 points, while the positive contribution of foreign demand doubled to 2.6 points.

After the release of the data, the secretary of state for the economy, José Manuel Campa said the global slowdown, particularly in the euro zone, had made it "more difficult" for the economy to grow at the rate of 1.3 percent forecast by the government, although he insisted that target was still "possible."

Household spending fell 0.2 percent from a year early but showed surprising resilience on a quarterly basis, rising 0.6 percent after falling 0.1 percent in the first quarter.

Public spending contracted an annual 1.0 percent in the second quarter after rising 2.6 percent in the first three months of the year and was down 2.4 percent on a quarterly basis.

Annual growth in exports slowed to 8.4 percent from 12.1 percent in the first quarter, while imports shrank 1.7 percent after rising 6.3 percent.

The extent of the slowdown in global trade, however, was made more evident by the quarterly figures, which showed a fall of 1.9 percent in exports. The foreign sector was partly saved by the export of services which rose 5.4 percent, reflecting a recovery in the tourist industry. Imports in the quarter were down 3.7 percent from the previous three months.

Campa said available figures point to a further slowdown in exports in the third quarter.

"Europe is slowing and external demand is slowing," Bloomberg quoted Giada Giani, an economist at Citigroup in London, as saying. "We see minor contractions of GDP in the second half of the year."