* Unemployment rises to 21.3 pct in Q1 vs 20.3 pct in Q4
* EU-harmonised flash CPI +3.5 pct in April vs 3.3 pct March
* March retail sales -8.6 pct March vs -4.5 pct in Feb
* Data point to faltering economic recovery
(Adds deficit target, government comment)
By Paul Day
MADRID, April 29 (Reuters) - Weak jobs data, sliding retail sales and rising inflation confirmed Spain’s economic recovery is faltering as the government presses ahead with spending cuts to rein in the euro zone’s third largest deficit.
Spain expects its public deficit to reach 2.1 percent of gross domestic product in 2014, the government said in a document shown to reporters on Friday, down from 9.2 percent in 2010.
But unemployment, running at more than double the European Union average, rose to a 14-year high of 21.3 percent, or 4.9 million people, in the first quarter, the National Statistics Institute (INE) said on Friday.
Retail sales, meanwhile, posted their sharpest decline for more than two years in March, and in April consumer prices rose faster than at any time since October 2008, pointing to a further loss of momentum for a stagnant economy already beset by inflationary pressures and depressed consumer sentiment.
Persistently weak growth will in turn undermine government efforts to close the fiscal gap and try to persuade investors Spain will not follow Greece, Ireland and Portugal into a bailout.
“These data show that Spain is going to take time to recover,” economist at Banco Sabadell, Juan Rodriguez Rey, said.
“Domestic consumption is a big part of gross domestic product in Spain. With the unemployment rate we have, low consumption affects output and GDP.”
The premium investors demand to hold Spanish over German debt slid to 207 basis points on Friday, the lowest level in two weeks and down around 3 bps on the day ES10YT=TWEB DE10YT=TWEB.
The government says unemployment will end the year at an average of 19.8 percent as a return to growth begins to create net jobs in the second half of 2010.
“The Easter week effect has contributed to a seasonal aspect which traditionally means a negative (jobs) figure for the first quarter, which makes us think things will improve,” Economy Secretary Jose Manuel Campa told a press conference.
But the Bank of Spain is less optimistic, seeing the rate, which reached 20.3 percent in the fourth quarter, at over 20 percent into next year.
“Hopefully this marks the peak of unemployment. I don’t think the situation will improve dramatically in the next few quarters but it should at least stabilise,” economist at Unicredit Tullia Bucco said.
Spain’s economy tipped into recession in mid-2008 after a burst property bubble hit domestic demand and sent the key construction and services sectors tumbling, prompting mass layoffs and more than doubling the number of people out of work.
Despite emerging from its slump at the start of 2010, the fallout from the collapsed building industry and persistent consumer caution has left the economy close to stagnation, and it is likely to remain depressed due to a continuing credit crunch.
Retail sales fell 8.6 percent year-on-year on a calendar-adjusted basis in March after an adjusted fall of 4.3 percent in February, official data showed, the sharpest decline since February 2009 and the ninth consecutive month of falls.
Spain’s EU-harmonised consumer price index rose to 3.5 percent year on year in April, preliminary data showed, the highest level since October 2008 and compared to 3.3 percent year-on-year in March.
The inflation level was mainly due to rising prices of travel, food and non-alcoholic drink, INE said.
The preliminary national consumer price index rose 3.8 percent compared with 3.6 percent a month earlier.
INE reports final consumer price data May 12.
Spain’s current account deficit in the two months to February expanded slightly to 12 billion euros from 11.5 billion euros a year earlier, the Bank of Spain said on Friday.
The deficit for February fell to 5.4 billion euros from 6.2 billion euros in the same month last year.
The trade deficit dropped to 2.9 billion euros from 3 billion euros as exports rose 21 percent while imports jumped 16.7 percent.
Reporting by Paul Day, Editing by Fiona Ortiz, John Stonestreet