Final official data has confirmed that Spain’s economy shrank in the third quarter. It is the first time since 1993 that Spanish GDP didn’t expand. The euro zone’s fourth-largest economy contracted 0.2 percent between July and September.
The head of Spain’s central bank has predicted recession in the fourth quarter through into next year and said a fall in building investment will intensify with an abrupt halt in housing starts in 2009.
Construction output in Spain was down 15.9 percent in the third quarter compared with the same period last year. That is much higher than Germany, France and the euro zone as a whole.
Analysts were surprised by how fast the country’s housing slump is sapping consumer spending. The central bank governor also said consumer spending will continue to slow due to labour market weakness.
Spain has the highest unemployment rate in the EU – 11.3 percent of the working population – which also means less tax revenue is being collected by the Madrid government.