Spain seals exit from 2-year recession in third quarter

Reuters

* Spain's economic output grows 0.1 percent in third quarter

* Preliminary INE numbers confirm exit from recession

* Consumer prices see lowest rise in four years

By Paul Day

MADRID, Oct 30 (Reuters) - Spain's economy grew between Julyand September after contracting for nine quarters and inflationeased in October, data showed on Wednesday, laying thefoundations for an upturn in dire domestic demand.

Gross domestic product (GDP) inched 0.1 percent higher inthe third quarter from the second, state statistics agency INEsaid, marking the first time the economy has grown since thebeginning of 2011 and officially ending a two-year recession.

The growth rate, from preliminary figures, confirmed areport released last week by the Bank of Spain.

Spain's economy has been shrinking, or near flat, since adecade-long property bubble burst in 2008, leaving millions outof work and thousands of companies out of business.

"Growth seems to be due to the strength of the externalsector, which is encouraging, and business surveys suggest theremay be more of that to come in the near term," said Ben May,economist at Capital Economics.

"However, domestic demand is still contracting and againstthat backdrop it's hard to see a strong and sustained recovery."

INE confirmed that third quarter output was supported byexports, the only area of growth since the recession began, anda busy tourist season as holidaymakers shied away from resortsin the politically troubled Middle East and northern Africa.

Domestic consumption has plummeted since the property crash,though the first increase in retail sales after over three yearsof contraction in September suggested the worst of the downturncould be over.

Depressed high-street spending could see a slight boost froman easing of inflationary pressures.

Consumer prices rose just 0.1 percent in October, accordingto preliminary data for European-harmonised inflation onWednesday, the lowest annual increase in four years.

National prices fell 0.1 percent, the first drop sinceOctober 2009 and mostly due to a 3-percentage-point increase invalue added tax in September 2012.

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