Summary Spain crawled out of a two-year recession in 3rd quarter but unemployment remained high.
MADRID (AFP) - Spain crawled timidly out of a two-year recession in the third quarter of this year, official data showed Wednesday, but unemployment remained extremely high and weak consumption tempered the recovery.
Strengthening exports helped the Spanish economy, the eurozone s fourth-biggest, to grow 0.1 percent compared to output in the previous quarter despite weak internal demand, the National Statistics Institute said in a statement.
At eurozone level in general, analysts say that signs that countries which ran in to severe difficulties are showing some success in restructuring their economies and their trade balances are of critical importance to the recovery of the whole single currency area.
However, regarding Spain, economists warn of continuing challenges to recovery and expect unemployment to remain painfully high after five years of crisis that have thrown millions out of work and driven up poverty.
The unemployment rate was 25.98 percent, according to separate INE data released last week -- a slight decline from the previous quarter but still the second highest in the eurozone after Greece.
It was Spain s second recession in five years, sparked by the collapse of a building boom in 2008 which last year made the country a focus of concern for the stability of the whole eurozone.
Wednesday s growth figures -- preliminary data from the institute which are due to be confirmed on November 28 -- confirmed last week s estimate from Spain s central bank.
The Spanish government expects an overall contraction of 1.3 percent for 2013 -- slightly better than the 1.6 percent in 2012 -- before a return to timid growth of 0.7 percent in 2014.
"The worst has passed," Rafael Pampillon, an analyst from Spain s IE Business School, told AFP.
He said the data provided a "very solid basis" for recovery, with exports fuelled by an economy that is "more competitive than before the crisis" due to hiring-and-firing reforms that have lowered labour costs.
Consumer price inflation in Spain slowed in October to 0.1 percent compared to a year earlier, according to other preliminary data from the statistics institute, harmonised with EU estimates.
Inflation has been easing in Spain since peaking a year ago, in line with a general easing in the eurozone.
By another measure, the non-harmonised inflation figure that serves as a benchmark in Spain, inflation was negative for the first time for four years, at minus 0.1 percent.
Analysts from Spanish group Renta 4 said in a note that this easing of inflation was a "sign of the weakness" of the recovery.
While Spain s labour reforms, which sparked angry street protests last year, may have spurred productivity, lower salaries and high unemployment are dampening domestic consumption, in turn tempering growth, analysts warned.
Despite an encouraging outlook for exports, "falling wages, weak employment growth at best and the poor state of households finances suggest that a recovery in household spending could be some way off," wrote Ben May, an analyst at the consultancy Capital Economics.
"Tight credit conditions are likely to hold back investment too."
Spain has pushed through painful spending cuts to bring down its soaring public deficit under pressure from the European Union, aiming to save 150 billion euros ($206 billion) between 2012 and 2014.
It resisted pressure last year to seek a full bailout from its neighbours but accepted 41.3 billion euros in eurozone rescue loans for its banks.
The International Monetary Fund has warned Spain s unemployment rate will stay above 25 percent until 2018.
"We are coming out of the crisis on a strong basis but employment will be a long-term problem," said Pampillon.
