Spain Posts Current Account Surplus as Recession Continues

Spain posted its third monthly current account surplus since the start of the euro as the Bank of Spain said the economy continued to contract in the final quarter.

The October surplus amounted to 865 million euros ($1.14 billion), the Bank of Spain said. That narrowed the shortfall for the first 10 months of the year to 14.9 billion euros from 31.7 billion euros a year earlier.

Spain, which ran the world’s second-biggest current-account deficit during its debt-fueled housing boom, is trying to rebalance its economy by reducing labor costs and strengthening exports. Demand for imports has slumped as consumers struggle with the highest unemployment rate in Europe, at 26 percent, and the deepest budget cuts on record.

Contracting internal demand continued to weigh down the economy in the last three months of the year, making for a sixth quarter of recession, the Bank of Spain said today in its monthly bulletin. It will give its first estimate of gross domestic product at the end of next month and the National Statistics Institute publishes its data on Jan. 30.

As Spanish bonds and stocks have risen since July, when the European Central Bank pledged to do whatever was needed to hold the euro together, foreign investment has increased. In October, Spain registered foreign-portfolio-investment inflows of 6.56 billion euros, compared with outflows of 9.3 billion euros in the same month last year, the Bank of Spain said. Still, for the first 10 months of the year, 83.1 billion euros of foreign investments left the country, almost twice the amount of the previous year.

To contact the reporters on this story: Charles Penty in Madrid at cpenty@bloomberg.net; Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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