(Updates with data, details starting in second paragraph.)
Oct. 6 (Bloomberg) -- Spanish industrial production unexpectedly rose for the first time in six months in August, backing up a prediction by Finance Minister Elena Salgado that Spain won’t relapse into a recession.
Output at factories, refineries and mines adjusted for the number of working days increased 0.3 percent from a year earlier, after a revised 2.3 percent in July, the National Statistics Institute in Madrid said in an e-mailed statement today. Economists expected a 4.7 percent decline, according to the median estimate in a Bloomberg News Survey. Non-seasonally adjusted output rose 0.6 percent from a year earlier.
Prime Minister Jose Luis Rodriguez Zapatero’s Socialist government is counting on exports and tourism to support a fragile recovery as the euro area’s highest unemployment rate weighs on consumer spending and investment. Spain’s trade deficit narrowed in July to its lowest level in 13 years as exports surged and the number of foreign tourists hit a record in August, providing a boost for the government is it tries to spur the economy.
Finance Minister Elena Salgado yesterday said Spain won’t fall back into a recession this year even as the Bank of Spain says the economy showed “weakness” in the third quarter. The August output increase was led by machinery and consumer goods, said INE, which originally reported that production had declined 2.8 percent in July.
Declining demand in developed countries and the deepest austerity measures in over three decades are undermining the nation’s recovery. Growth slowed in the second quarter to 0.2 percent from 0.4 percent in the previous three months as the country faces a 21 percent unemployment rate and the European sovereign-debt crisis fuels rising borrowing costs.
The government, which faces a general election on Nov. 20 that polls indicate it may lose, aims to cut the deficit to 6 percent of gross domestic product this year from 9.2 percent in 2010, and Salgado said yesterday that goal takes “priority” over growth in the “remaining months of the year.”
Funcas, the research arm of Spain’s savings-bank association, forecasts the economy will “practically stagnate” in the second half of this year, leaving the full-year growth rate at 0.7 percent. The International Monetary Fund predicts an expansion of 0.8 percent in 2011.
“We can expect weak growth in the second half, possibly even slightly negative numbers in the last quarter or the first months of 2012,” Jesus Castillo, an economist at Natixis in Paris, said by phone.
--Editors: Jeffrey Donovan, Andrew Davis
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