Recession eases in second quarter as export sector remains strong

The Spanish economy remained in recession in the second quarter of the year, according to figures released Thursday by the National Statistics Institute (INE). But on the back of ongoing strength in the export sector, and more stable domestic demand, the pace of the decline slowed to an extent that supports the government’s forecast of a return to growth later this year.

The INE figures reveal that GDP fell 0.1 percent on a quarterly basis, marking the ninth quarter in a row in which activity has contracted. That represented an improvement on the previous three months, when output shrank by 0.4 percent, and the last quarter of 2012, when it declined 0.8 percent. On an annual basis, the pace of the contraction slowed to 1.6 percent from 2.0 percent in the first quarter.

The figures confirmed an earlier estimate by the INE of a quarterly decline of 0.1 percent in GDP. Last month, Economy Minister Luis de Guindos said the economy would start to see slight growth in the coming quarters.

Growth in exports accelerated on an annual basis in the period April-June to 9.2 percent from 3.6 percent in the first quarter, although this was accompanied by a pick-up in imports, which climbed 3.1 percent after contracting 4.8 percent. As a result, the contribution of net trade — export minus imports — to overall GDP declined by 0.6 percentage points to 2.0 points.

Domestic demand continued to make a negative contribution to GDP, albeit of a smaller magnitude of 3.6 points, down one full point from the first quarter.

Household spending stabilized, declining only 0.1 percent on a quarterly basis after falling 0.5 percent in the period January-March, while that of the public administrations rose 0.9 percent after being flat the previous three months.

“You can’t rule out that in the second half of the year we could see positive growth rates, but the figures published today [Thursday] paint a scenario of very modest growth to the extent that the Spanish economy is going to need a lot of time before we see significant growth,” Reuters quoted Madrid-based Citigroup strategist José Luis Martínez as saying.

Separately, the INE estimated Thursday that consumer-price inflation slowed to 1.5 percent in August from 1.8 percent in July as a result of a slowdown in fuel prices.