Spanish economy rides into New Year on the tails of recession

The Spanish economy will again contract in the fourth quarter of 2012 with consumer spending down, partially to be blamed on the September hike in value-added tax from 18 to 21 percent, the Bank of Spain said Friday.

"The latest information on the last quarter points to a continuation of a decline in economic activity as a result of the contraction of domestic demand," according to central bank's latest bulletin on the economy.

The official growth percentage for the October-December period will not be known for several weeks. During the third quarter, the Bank of Spain said that the economy contracted 0.3 percent compared to the previous three-month period - a decimal point higher than the previous quarter. The only favorable data are figures from the tourism and export sectors, but the bank states that revenue generated by the tourist sector only experienced a "moderate rise" during the middle of the year.

Nevertheless, exports have been the Spanish economy's saving grace with products sold abroad rising by 8.6 percent in October compared to the previous month, the supervisor states.

Among reasons making the decrease in consumer spending so noticeable during the final quarter were the government's cancelation of the cost-of-living increase on pensions, new taxes imposed on some properties and the elimination of extra pay in salaries for public employees in December, the bank said.