Spanish economy shrinks 0.3% in third quarter

Spain's economy shrank by 0.3 per cent in the third quarter from output in the previous three-month period and by four per cent on a yearly basis, final figures from the national statistics institute showed yesterday.

Spain entered its first recession for 15 years at the end of 2008 as the global credit crunch worsened a correction which was already underway in its once booming housing sector. The numbers were in line with preliminary data it published last week and they compare with a second quarter drop in gross domestic product of 1.1 per cent on a quarterly basis and of 4.2 per cent on a 12-month basis.

The statistics office said the pace of the economic contraction softened in the third quarter owing to an improvement in domestic demand after government stimulus measures. Prime Minister Jose Luis Rodriguez Zapatero's Socialist government has responded to the economic slump by putting in place a stimulus plan worth more than two percent of GDP this year which it says is the largest in Europe.

The plan includes a massive works programme, which has torn up vast swatches of Spanish cities as workers extend or repair roads and pavements, that has failed to prevent the jobless rate from soaring.