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UPDATE 2-Spanish Feb retail sales in new record fall

Published 03/31/2009, 06:52 AM

* Retail sales post new record drop in February

* House prices continue slide in fourth quarter

* Jan current account deficit down as imports slide

(Adds further detail, quotes)

By Paul Day

MADRID, March 31 (Reuters) - Spanish retail sales suffered a new record slump in February as shoppers cut back on spending on the high street amid sliding house prices and the shrinking economy hit imports and exports of goods.

Retail sales dropped for the 15th consecutive month by 9.1 percent from a year earlier in calendar-adjusted terms government data showed on Tuesday, compared to a previous record fall of 8 percent in November.

"Yesterday we saw that prices in Spain are falling, but people are still not spending," said economist at 4Cast Jose Luis Zarate. "This is down to the unemployment concerns, as less people enjoy some level of disposable income. Even people who are still in work are reining in spending."

Spanish EU-harmonised consumer prices fell 0.1 percent in March year-on-year, the first negative inflation figure for at least 45 years.

Spanish unemployment was 14.8 percent in January according to official European data, almost double the 27-member average, and many economists believe this could rise to over 20 percent in the next year.

Tuesday's data supported comments by Economy Minister Pedro Solbes on Monday the economy was still to hit bottom and dampened hopes a turn around would be seen any time soon.

"I don't see any signs of recovery in the first half of this year. Yesterday, the price fall also showed the economy is still very weak," said Citi economist, Jose Luis Martinez.

HOUSING SLUMP

Tumbling consumer confidence has been further eroded by sliding house prices, which fell 5.4 percent in the fourth quarter after sliding 3 percent in the third quarter, government data showed on Tuesday.

"Consumers have been hit by two channels. Collapsing unemployment and the falling property market," said economist at Lombard Street, Michael Taylor.

"The phenomenal price rises in real estate to 2007, and relatively low unemployment, helped boosted spending. But as those fall, people have stopped buying."

The sharpest drop was registered in existing home prices, which were down 10.7 percent from a year earlier, while the retail figures showed spending on household goods was hit especially hard, down almost 25 percent.

As Spaniards tightened their belts amid falling house prices and the shrinking industry shed jobs, both imports and exports fell sharply, the Bank of Spain said on Tuesday.

Spain's current account deficit almost halved in January from a year earlier as exported goods dropped 25.6 percent and imported goods plummeted 35.1 percent. (Reporting by Paul Day; editing by Chris Pizzey/Victoria Main)

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