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Spain Factory Growth Positive

A turnaround in the job market has helped Spain extend its recovery from a deep recession.A turnaround in the job market has helped Spain extend its recovery from a deep recession.

Spanish factory activity expanded at the fastest pace in 11 months in December driven by strong orders and increasing output, a survey showed on Monday, adding to expectations of more economic growth in the last quarter.

Markit’s purchasing managers’ index of manufacturers rose to 55.3 in December from 54.5 in November. The index has held above the 50 line separating growth from contraction every month since November 2013, Reuters reported.

“The Spanish manufacturing PMI signaled that the sector ended 2016 on a high, with growth back at the levels seen at the start of the year. The picture is much more positive than in the summer when output and new orders stagnated,” senior economist at Markit Andrew Harker said.

New factory orders expanded at their fastest pace since the beginning of the year in December, rising to 57.1 from 55.4 a month earlier. The government has said it expects the economy to expand at up to 0.8%, quarter on quarter, in the October to December period.

Spain’s economic growth may have exceeded the 3.2% pace officially projected by the government for 2016, Economy Minister Luis de Guindos said in a radio interview on Sunday.

De Guindos also said Spain would be looking to maintain its net debt issuance target for 2017 at around €35 billion ($37 billion).

A household spending revival, led by a turnaround in the job market, has helped Spain extend its recovery from a deep recession in spite of still high unemployment and political uncertainty.

De Guindos told Cadena Ser radio that economic output last year could have been above 2015 levels. The government’s official growth projection for both 2015 and 2016 is 3.2%.

“At this time the estimate we are handling is that growth may have been higher in 2016 than in 2015,” De Guindos said.

He forecast that inflation, which rebounded sharply in December as global oil prices surged, would average around 1% in 2017.

Spain took 10 months to form a government in 2016 after two inconclusive elections, before conservative leader Mariano Rajoy was reinstated for a second term as prime minister in October.

With a weak minority in parliament, Rajoy is still wrangling with opposition parties over a budget plan for 2017 that would convince the EU that Spain could reach its deficit targets.

De Guindos said he believed the European Commission would not demand extra measures to reach a deficit goal of 3.1% of output in 2017 after the Spanish government outlined plans to hike some taxes. It aims to eliminate some tax breaks for companies and raise levies on tobacco and sugared drinks.

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