Spanish exports continued to drive economic growth in the first quarter, offsetting a slump in domestic demand caused by the deepest austerity measures in three decades.

Exports rose 5 percent from the previous three months, when they expanded 3.9 percent, and grew 11.2 percent from a year earlier, the National Statistics Institute in Madrid said today. Household spending was unchanged from the previous three months, when it increased 0.3 percent. The economy expanded 0.3 percent from the fourth quarter and 0.8 percent from a year earlier, INE said, confirming an initial estimate from May 13.

The gain in exports is bolstering earnings at some of the country’s biggest manufacturers, while doing little to reduce the European Union’s highest jobless rate and boost domestic demand. Madrid-based Acerinox SA (ACX), the world’s largest stainless- steel maker, reported a six-fold increase in first-quarter profit on May 3 and said global demand allowed the company to be “optimistic” about the following three months.

Even with the economy expanding, Spain’s unemployment rate rose to 21.3 percent in the first quarter, threatening to undermine predictions by the Socialist government that the economy will expand 1.3 percent this year. Domestic demand fell 0.6 percent from a year earlier, INE said.

“Exports accelerated but so did imports, and foreign sales will not be able to sustain growth over the whole year,” said Thibault Mercier, an economist at BNP Paribas in Paris. “We expect growth to slow down in Spain in the next quarter.”

Debt Crisis

Spain’s economy emerged from almost two years of recession in 2010, just as Europe’s debt crisis was spreading and increasing borrowing costs in the region’s high-deficit countries. The government imposed an austerity plan to slash a deficit that reached 11 percent of gross domestic product in 2009, the euro region’s third largest, to 6 percent this year.

The squeeze on Spanish households, pressured by rising mortgage costs and unemployment, is eroding support for the government, which faces elections in 13 of 17 regions on May 22. The Socialist Party is set to lose most of the races, including in the region of Castilla-La Mancha, which it has controlled for three decades, according to a poll by the state-run Center for Sociological Research on May 5.

A general election is due by March 2012, and polls also suggest the Socialists will lose to the opposition People’s Party.

Bloomberg