By Andrew Hay
MADRID, May 6 (Reuters) - Spanish industry suffered another record slump in March but service activity fell at a slower pace in April in a sign Spain's severe recession could be easing, data showed on Wednesday.
Output at Spanish factories and mines fell a higher-than-expected 24.7 percent in March, the eighth month of deepening decline, but analysts expected the sector to pull out of freefall if global demand picked up. [ID:nL654807]
Service activity slid again in April but at a much slower pace than previous months as confidence began to return, the Markit Economics Purchasing Managers' Index showed [nLAG003414].
"The pain may be easing, but we're talking about going from very intense to merely intense," said economist Peter Dickson at Commerce Bank in London.
END OF TUNNEL?
Hit by the twin shocks of the global crisis and a construction boom collapse, the European Commission expects Spain to be the last economy in the European Union to exit recession, probably in 2011.
Spain's government is counting on industry and services to substitute construction as drivers of economic growth.
Most economists say that is wishful thinking given weak competitiveness and are pushing Prime Minister Jose Luis Rodriguez Zapatero to launch reforms to boost low productivity.
Spain's government on Tuesday said the worst of the economic crisis could be over after April jobless claims rose at their slowest pace in nine months and consumer confidence hit a year high. [ID:nL5932273]
Backing that outlook were business expectations in Spain's service sector which reached a 15-month high in April, according to Markit data.
But the service sector showed a considerably sharper rebound from record declines than manufacturing, which continued to contract at a rapid pace in April. [ID:nLAG003407]
Troubling analysts is the scale of Spain's economic problems after 15 straight years of credit-fuelled growth built on creation of over 8.5 million low-skill jobs in construction and service sectors that have imploded.
The International Monetary Fund says it could take years for Spain to recover from unemployment that is now the highest in the European Union and an industrial slowdown that is the steepest of any large European economy.
"Everybody is desperate to look for the positive signs in the economy -- you can't call them positive, it's just there are some incipient signs of light at the end of the tunnel," said Jose Garcia Zarate at the 4Cast consultancy.
(Additional reporting by Manolo Ruiz, Paul Day; editing by Toby Chopra)