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Spanish industrial production unexpectedly fell the most in more than two years in April as the fourth-largest economy in Europe’s single currency union sank deeper into recession amid surging borrowing costs.
Output at factories, refineries and mines adjusted for the number of working days fell 8.3 percent from a year earlier, the biggest contraction since October 2009, the National Statistics Institute in Madrid said today in an e-mailed statement. That is more than the median forecast for a 6.5 percent contraction by eight economists surveyed by Bloomberg, and follows a 7.5 percent drop in March.
The Bank of Spain said May 29 that the country will slide deeper into its second recession since 2009 as Prime Minister Mariano Rajoy strives to cut the budget deficit by 40 percent in one year. Spain ended 2011 with a shortfall of 8.9 percent of gross domestic product, similar to that of Greece.
The government predicts domestic demand will shrink 4 percent in 2012, more than four times last year’s rate, as nearly a quarter of the workforce is jobless. Vodafone Group Plc said on May 22 its full-year operating profit declined 1.3 percent as consumers in Spain, Italy and Greece cut spending.
Investors’ concern that Spain may need to request European Union aid to shore up its ailing banking system has fueled a surge in borrowing costs. The yield on Spain’s 10-year benchmark bond was little changed at 6.31 percent at 8:45 a.m. in Madrid, and rose as high as 6.7 percent on May 30, close to its euro-era high of 6.78 percent and the 7 percent level that heralded bailouts in Greece, Ireland and Portugal.
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