Drop in retail sales adds to Spain woes

MADRID - The Associated Press

A record drop in retail sales added to Spain’s woes yesterday as the country struggles to contain the crisis crippling its banking industry and investors remained wary of the country’s ability to manage its debt.

Retail sales dropped 9.8 percent in April in year-on-year on a seasonally-adjusted basis as the country battles against its second recession in three years and a 24.4 percent jobless rate that is expected to rise. The fall in sales was the 22nd straight monthly decline, and was more than double the 3.8 percent fall posted in March, the National Statistics Institute said yesterday.

A gloomy Bank of Spain report heaped more bad news on the government. The central bank said in its monthly economic analysis it anticipates the economy will keep shrinking at least until the end of June, after contracting 0.3 percent in the first quarter. The government has predicted a 1.7 percent contraction in 2012.

The conservative government has introduced harsh austerity measures, including spending cuts on health and education, in attempt to control the level of its debt relative to the sign of its economy. It is also trying to reassure investors worried that the woes of the banking sector, heavily exposed to an imploded real estate bubble, will drag the country into a bailout like Greece, Ireland and Portugal needed.

Late last week Bankia, the nationalized lender and Spain’s fourth-largest bank, announced that it would need a further 19 billion euros in state aid to shore up its defenses against losses from its toxic loans. News of the bailout, and concerns over how the government would raise the money, sent Spain’s main IBEX 35 stock index down to nine-year lows on May 28.