Recession eased at start of year but seven-quarter contraction confirmed

Spain’s National Statistics Institute (INE) confirmed on Tuesday that GDP had contracted by 0.5 percent in the first quarter of the year compared to the end of 2012, a figure which is in line with what the Bank of Spain indicated last week.

Spain’s second recession in the past four years now stretches back seven quarters, although the 2008-09 dip was deeper. Compared to one year ago, the economy has contracted by two percent.

In its most recent economic bulletin, Spain’s central bank explained the somewhat better figure for early 2013 had been caused by a smaller drop in private consumption, which fell an annual 0.3 percent in the first quarter after a contraction of 2.0 percent in the final three months of 2012. The steep drop in spending at the end of last year was put down to many families having to cope with the removal of civil servants’ annual extra payment, and the September VAT rise having led to big-ticket purchases being brought forward to the summer period.

The first-quarter figure also fits in with the Popular Party government’s revised forecasts for this year. As of last Friday’s Cabinet meeting, Prime Minister Mariano Rajoy’s economic team foresees a contraction of 1.3 percent of GDP for the whole of 2013, a figure that is still slightly more optimistic than those of the main multilateral organizations. The IMF predicts a drop of 1.6 percent, while the European Commission puts the figure at 1.4 percent.

Unemployment in Spain climbed above six million for the first time ever in the first quarter of the year as the jobless rate hit an unprecedented 27 percent of the active population.