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UPDATE 1-Spanish households keep first quarter growth on track
May 26, 2016 / 8:46 AM / 2 years ago

UPDATE 1-Spanish households keep first quarter growth on track

(Adds details on consumer spending and investment data)

MADRID, May 26 (Reuters) - Spending by Spaniards seemingly unworried by a bout of political uncertainty helped the economy grow at a steady pace in the first quarter, final official data showed on Thursday.

Investment flows also held up, the National Statistics Institute (INE) said, with output up 0.8 percent from the previous three months, the same rate as the two quarters before.

Spanish voters are set to return to the ballot box on June 26 after an inconclusive election last December that failed to produce a coalition and opinion polls showing that once again no one party will win a parliamentary majority.

Fears that the economy might suffer if the political impasse drags on did not stop Spaniards spending at an even faster rate in the first quarter compared with the fourth, suggesting recovery from deep recession still had momentum after the vote.

However, the Bank of Spain said on Wednesday that activity may have slowed slightly in the second quarter, while surveys show consumer confidence waning.

A turnaround in the job market has fuelled consumption, even as unemployment levels remain far above those elsewhere in Europe except for Greece, affecting 21 percent of the workforce.

The political deadlock also triggered concerns that companies would delay expansion plans, though the fallout for gross domestic product (GDP) has so far been slight.

Manufacturers’ investment in equipment and machinery was slightly weaker in the first quarter, the INE data showed, growing at close to 10 percent year-on-year against almost 11 percent in the previous three months.

Spain’s economy is still expected to expand at one of the fastest rates in the euro zone this year - at 2.7 percent, according to the acting government - though scrutiny is also growing over whether that will be enough to reach deficit targets without spending cuts.

The centre-right People’s Party, which lost its majority in December, has struggled to gain support from the recovery, in part because the benefits have not reached many voters.

Low inflation and energy prices have raised families’ purchasing power in recent months but average incomes have dwindled and although jobs are returning, many are temporary. (Reporting by Sarah White; Editing by Paul Day and Louise Ireland)

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