Spain's National Statistics Institute said the Spanish economy remains mired in recession after contracting 0.4% in the second quarter of the year from the previous three month period.

It was the third consecutive contraction following the previous two 0.3% quarterly declines.

A technical recession is commonly defined as two consecutive quarters of economic contraction.

The institute said today the second quarter decline was due to negative domestic demand, compensated somewhat by an increase in exports.

Spain with near 25% unemployment is struggling to avoid having to seek a financial bailout, as Greece, Ireland and Portugal have already done.

Spain's consumer prices rose 2.2% year-on-year, with the increase above forecasts because of medicine price hikes put in place by the government to save money and deflate the deficit.

Economists warned price hikes, and especially a 3-point rise in value-added tax due to come into effect in September, would distort consumer prices while the deepening recession reflected slower domestic demand.

That will further weaken the government's efforts to get the economy growing again - vital if it is to meet targets on reducing its budget shortfall and halting a market-inspired crisis in how it finances its debt.

Spain slipped into the second recession since 2009 in the first quarter and is expected to continue to shrink until well into 2013 as consumers and businesses rein in spending and the euro zone debt crisis saps investor confidence.

Fears over the health of Spain's economy as it fights to reduce its public deficit has lifted funding costs to euro-era highs in recent weeks leading many to think an application for a full-bailout could soon become inevitable.

A full breakdown of the growth data will be published August 28, while the final price data will be available August 14.