Spain Slowing Export Growth Undermines Rajoy Recovery

Spanish export growth slowed in July, undermining Prime Minister Mariano Rajoy’s forecast that the fourth-largest economy in the euro region may emerge from its recession by the end of the year.

Exports rose 1.3 percent in July from a year earlier, after a 10.5 percent increase in June, while they registered a 4.7 percent decline on the month, data released by the Economy Ministry in Madrid show. Even so, the trade deficit narrowed by 54 percent from a year earlier to 786.7 million euros ($1.06 billion). Imports fell 3 percent from a year earlier.

Rajoy is counting on foreign sales and tourism to end a six-year economic slump in Spain after the 17-nation euro region, which includes its main trading partners, emerged from a record-long recession in the second quarter. Deputy Trade Minister Jaime Garcia-Legaz Ponce predicts record exports this year as the country’s competitiveness has improved.

Hyundai Motor Co. (005380) considers Spain “attractive” to invest in due to the flexibility of its plants that has improved costs, Cinco Dias reported this month, citing Chief Operating Officer Allan Rushfort.

Over the first seven months of the year, Spanish exports are up 7 percent from the same period last year while imports have dropped 3.1 percent, narrowing the trade deficit by 68 percent to 6.61 billion euros.

Spain’s 10-year yield rose three basis points to 4.35 percent at 10:59 a.m. in Madrid, compared with a euro-era record of 7.75 percent in July 2012. The spread with similar German maturities widened to 2.43 percentage points.

To contact the reporter on this story: Angeline Benoit in Madrid at abenoit4@bloomberg.net

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

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