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UPDATE 1-Spanish growth picks in Q2 as GDP reaches pre-crisis levels
July 28, 2017 / 8:44 AM / 4 months ago

UPDATE 1-Spanish growth picks in Q2 as GDP reaches pre-crisis levels

(Adds details, inflation)

MADRID, July 28 (Reuters) - Spanish growth sped up in the second quarter, underscoring forecasts that gross domestic product could expand by at least 3 percent in 2017 for the third year running thanks to robust exports and spending by Spanish households.

Spain’s output grew 0.9 percent in the April to June period from the previous three months, data from the National Statistics Institute (INE) showed on Friday, in line with forecasts and up from 0.8 percent in the first quarter.

Spain’s economic worth rose above the high seen at the beginning of 2008, just before a property market crash pushed the country into a prolonged double-dip recession.

The preliminary INE figures gave no breakdown of the main GDP drivers.

But exports have grown strongly in recent months, while the pace of job creation has remained healthier than many analysts had initially projected this year, helping to extend a household spending rebound.

That is in spite of higher consumer prices this year compared with 2016, as a rise in global oil costs contributed to a squeeze on family incomes in Spain, which is highly dependent on energy imports.

“We believe consumer spending growth appeared to regain some momentum in the second quarter, continuing to ride on the back of strong employment creation and a comfortable financial climate,” Raj Badiani, economist at IHS Markit, said in a note.

Spain’s economy has so far appeared to shrug off any fallout from Britain’s decision to leave the European Union, which is expected to have knock-on effects on several fronts.

Spain is a holiday destination favoured by many Britons, for instance, raising concerns that a fall in the pound would put off some visitors.

Four years after emerging from a deep economic slump that sparked mass unemployment and sent many businesses to the wall, the Spanish economy is one of the fastest-growing in the euro zone.

After initial expectations of a slowdown from 3.2-percent growth in 2015 and 2016, the government has had to hike growth projections twice this year and now forecasts the economy to expand by at least 3 percent in 2017.

Potential headwinds are still lurking, however, with interest rates around the world on the rise and increasing political risks, including in Spain, which is now run by a minority government.

Unemployment, even though it is falling, also remains very high at 17.2 percent.

On an annual basis the economy grew by 3.1 percent, up from 3 percent in the first quarter, and also in line with forecasts, INE said. (Reporting by Sarah White and Paul Day; Editing by Alison Williams)

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