Spanish economy contracts at fastest rate on record

The Spanish economy shrank at its fastest rate on record in the first quarter as household spending plummeted due to soaring unemployment amid the recession, official data showed Wednesday. Gross domestic product was down 1.9 percent in the first three months of year from the previous quarter and off 3.0 percent compared to the same period in 2008, the National Statistics Institute (INE) said.
It was the third quarterly contraction in a row after a fall of 1.0 percent in the three months to December and 0.3 percent in the third quarter of 2008. It was also sharpest decline since INE began recording such figures in 1970. The outcome was slightly worse than provisional data last week that put the first quarter contraction at 1.8 percent from the previous quarter and 2.9 percent from last year.
INE blamed the slump on lower household spending, badly hit by soaring unemployment, which jumped to 17.4 percent in March, more than double the average of 8.3 percent for the entire 27-nation European Union. It said household spending fell 4.1 percent after a drop of 2.3 percent in the last three months of 2008.
Exports plummeted 19 percent, compared to a fall of 7.9 percent in the previous quarter, "in line with the negative evolution of domestic demand in the countries of destination," the INE said. Imports were also sharply lower due to the economic crisis, falling 22.3 percent in the first quarter compared to 13.2 percent in the previous three months.
In March the Spanish trade deficit contracted 61.9 percent to 3.66 billion euros, according to the industry ministry. The statistics body said investment in construction had plunged 12.4 percent in the first quarter. Prime Minister Jose Luis Rodriguez Zapatero, under attack from the opposition over the figures, said they were "less negative than other countries" in Europe.
Spain entered its first recession for 15 years at the end of 2008 as the global credit crunch worsened a correction that was already underway in its once booming housing sector. The Socialist government has said in recent weeks that Spain has reached the trough of the crisis and predicted signs of recovery would soon be evident.