Spain's economic growth picked up in the second quarter, official data showed Wednesday, but consumer prices fell in July in a sign that consumer demand remains weak.
The Spanish economy expanded by a better-than-expected 0.6 percent, up from growth of 0.4 percent in the first quarter, according to preliminary figures from the National Statistics Institute.
The Bank of Spain had predicted that the economy expanded by 0.5 percent between April and June.
The figures came the day after the government raised its forecasts, saying it hoped growth in Spain, with the fourth-biggest economy in the eurozone, would be close to 1.5 percent this year and possibly 2.0 percent next year.
The International Monetary Fund also raised its forecasts last week for the country's growth this year and next.
Spain is climbing out of a deep recession triggered by the financial crisis, which led to the bursting of a big property bubble, and pushing the unemployment rate up to a record high of 27.2 percent during the first quarter of 2013.
The latest unemployment data showed that rate edged below 25.0 percent in April-June for the first time since the third quarter of 2012. But at 24.47 percent, it remains one of the highest in the industrialised world.
The country clawed out of its second recession in five years during late last year, having applied radical reforms to strengthen public finances, the banking system and the labour market.
The growth figures for the second quarter show that gross domestic product rose by 1.2 percent over 12 months.
This marked a rapid acceleration from the first quarter when growth over 12 months was up by just 0.5 percent.
Growth in the second quarter was boosted by a pick-up of internal demand, which partly countered a slight weakening of demand from abroad, the national statistics office said.
Spain, like other crisis-hit eurozone countries hit, is counting on increased efficiency and exports largely to kick-start the economy, with domestic demand driving up growth, which eventually lowers unemployment, pushing up wages and so taxes.
- Spain could 'outperform' eurozone -
Analyst Daniele Antonucci at Morgan Stanley in London said "not only has the Spanish economy recovered further" but "it also looks likely that it has outgrown most of its peers –- from Germany to France and Italy".
"These rates of expansion, especially next year, should make Spain an economic outperformer," he added.
Exports, helped by "competitiveness due to rising productivity and wage moderation... are a key driver of rising GDP, but no longer the only one," he said.
"Domestic demand is also now a factor. We expect this to make the breadth of the recovery wider."
In a separate statement, the statistics institute reported that Spanish consumer prices fell by 0.3 percent in July on an annual basis, mainly because of fuel, food and drink prices.
The fall in inflation is a sign that consumer demand, while on the rise, is "still too low to push prices higher," said Thibault Mercier, an economist at BNP Paribas.
Not that Spain is yet at risk of sustained deflation: a sustained fall of prices, which can trigger a vicious spiral of falling demand as people delay purchases in the hope of future prices rises that puts the brakes on economic activity, he added.
Spanish prices, measured on a European Union harmonised basis, fell in March by 0.2 percent, but then rose by 0.3 percent in April, 0.2 percent in May and were steady in June.
"Everything indicates that this weakness in prices, on the edge of deflation, will continue in the coming months," said Maria Jose Landaburu, secretary general of the Union of Self-Employed Workers and Small Enterprises, UATAE.