AFP - Spain's economy contracted in the third quarter, although at a slower pace than in previous quarters, official data showed Thursday, contrasting with a return to growth seen elsewhere in Europe.

Gross domestic product declined 0.3 percent from the previous quarter, its fifth straight quarterly contraction, and was down 4.0 percent from a year earlier, the National Statistics Institute said in preliminary figures.

It follows quarterly contractions of 1.1 percent in the second quarter, 1.6 percent in the first quarter, 1.1 percent in the three months to December and 0.6 percent in the third quarter of 2008.

The statistics office said the slowdown in the pace of economic contraction was due to "a less negative contribution of domestic demand and a positive contribution of exterior demand" as government stimulus measures helped smooth the decline in activity and a return to growth in other nations aided exports.

Economy Minister Elena Salgado said the quarterly growth figures were "compatible" with the government's forecast that the Spanish economy, Europe's fifth largest, will return to growth by the second half of 2010.

"We expect that the results of the next quarters with our predictions and they will be better," she told reporters.

The latest quarterly results leave Spain, along with Britain which unexpectedly slumped 0.4 percent in the third quarter, as the only large European economies still stuck in recession, usually defined as a drop in GDP for two or more consecutive quarters.

The European Commission forecasts the entire 16 member eurozone likely expanded during the third quarter.

Eurozone heavyweights France and Germany will publish third quarter GDP data on Friday. Both nations posted surprise economic growth in the second quarter of 2009, meaning their recessions were technically over.

The Spanish economy has proved especially vulnerable to the global credit crunch because its growth relied heavily on credit-fueled domestic demand and a property boom boosted by easy access to loans that has collapsed, leaving around one million new homes unsold.

Labour Minister Celestino Corbacho said the latest quarterly growth figures showed Spain was "slowly" emerging from recession "but we should not expect that we will emerge from the crisis with the speed with which we entered it."

The weakness of domestic demand was underscored by a survey published Thursday by business advisory group Deloitte which found Spanish consumers plan to spend 19.2 percent less this Christmas than they did last year.

The total average amount spent per adult this year on gifts, socialising, and food and drink will be 735 euros (1,103 dollars), its lowest level since 2005, it estimated.

Prime Minister Jose Luis Rodriguez Zapatero's Socialist government has responded to the economic slump by putting in place a stimulus plan worth more than two percent of GDP this year which it says is the largest in Europe.

The plan includes a massive works programme, which has torn up vast swatches of Spanish cities as workers extend or repair roads and pavements, that has failed to prevent the jobless rate from soaring.

Spain's unemployment rate has doubled over the past two years to hit nearly 18 percent, the highest level in Europe, with construction workers leading the job losses.

The country accounts for roughly half of the rise in the number of jobless in the eurozone over the last year, according to the European Union's statistics office Eurostat.

At the height of its 15-year boom, Spain was creating about half of all new jobs in the eurozone, which drew millions of immigrants, especially from Latin America and Eastern Europe.