Spanish retail sales down as a sign of slowing economy

Written by Associated Press | Madrid, March 28: | Updated: Mar 28 2008, 20:50pm hrs
Spanish seasonally adjusted retail sales fell 2.7 percent on the year in February, the government reported Friday, providing further evidence the euro zone's fourth-largest economy is slowing.

Spanish adjusted retail sales fell by 2.4 percent in January and by 1.9 percent in December.

The National Statistics Institute said February household goods sales fell 3.5 percent.

Spain has been one of the euro zone's fastest growing economies for more than a decade with gross domestic product rising at an average rate of 3.75 percent.

But household consumption - one of the main sources of Spanish growth - has slowed markedly in recent months as the result of more difficult financing conditions and soaring consumer price inflation.

In its February economic bulletin, the Bank of Spain said declining consumer confidence pointed to "a more pronounced deceleration of economic activity in early 2008."

The figures were the latest in a series of discouraging numbers for the Spanish economy.

The statistics institute said Wednesday that home sales in Spain fell 27 percent in January compared to a year ago - dramatic evidence of a slow-down in the once-booming real estate sector.

The number of mortgages granted in January also plummeted - by nearly 26 percent compared to January of 2007, in the biggest such drop since 2004, the institute said.

ASPRIMA, an association of real estate promoters in Madrid, predicted Thursday that housing prices in Spain will drop 8 percent this year.

The construction sector had been another driving force behind economic growth in Spain. Housing prices rose 17 percent in 2004 and 9.1 percent in 2006, for instance. But the sector started to cool dramatically in 2007, due in large part to higher interest rates on mortgages.