Spanish industrial production rose for the first time in two years in March, signaling the economy may have started to emerge from a recession.

Output at factories, refineries and mines rose 5.4 percent from a year earlier, adjusted for the number of working days, after slipping 1.9 percent in February, the National Statistics Institute said today in an e-mailed statement from Madrid. It was the largest increase since January 2006, and compares with a median forecast of 1.3 percent in a Bloomberg News survey of four economists.

Spain’s economy, struggling with the highest unemployment rate in the euro region and a surge in borrowing costs, fell into recession in 2008 after the collapse of a housing boom and the government expects a return to quarterly growth in the first quarter. As the global economy starts to recover, Madrid-based Acerinox SA, the world’s biggest stainless-steelmaker, said on April 27 its first-quarter sales rose 62 percent as prices and demand improved.

“Exports are doing very well,” said Jose Carlos Diez, chief economist at Intermoney in Madrid. “The industrial sector linked to residential construction has finished its structural adjustment and the other sectors are pushing the index higher.”

Lagging Recovery

Iron and steel production rose 25.6 percent in March from a year earlier, INE said, and vehicle production increased 26.7 percent. As part of its stimulus program, the government is offering incentives for car purchases. The central government provides as much as 500 euros ($647) which regional administrations can match, and automakers offer a 1,000-euro discount.

The recovery in Spain, which has the third-largest budget deficit in the euro area and an unemployment rate of 20 percent, is lagging behind that of larger countries in the currency region. For the full year, the economy may shrink 0.4 percent, while the euro region expands 1 percent, the International Monetary Fund said on April 21.

The extra interest investors demand to hold Spanish debt rather than German equivalents surged to 119.5 basis points today, the highest in 15 months, compared with 115.6 basis points yesterday.