An operator watches display screens in a control room at a clothing factory of Spanish textile retailer Mango in the industrial town of Palau-solita i Plegamans near Barcelona May 29, 2013. REUTERS/Gustau Nacarino

MADRID (Reuters) - Spain's industrial output fell for the 23rd straight month in July but an economist said he still sees potential for a weak recovery in the recession-hit economy before the end of the year.

Calendar-adjusted output fell 1.4 percent year-on-year in July, data from the National Statistics Institute showed on Friday after a drop of 2.2 percent in June, which was revised down from a preliminary reading for a 1.9 percent contraction.

"The figure shows that the adjustment in production continues, but in reality this monthly figure ... indicates that you can't rule out slight economic growth in the third quarter," said Jose Luis Martinez, economist at Citi in Madrid.

Spain's economy has been contracting since the second quarter of 2011, though recent indicators, including manufacturing and service sector surveys, suggest some expansion on the horizon.

Exports have been robust and better-than-expected economic performance in the euro zone in the second quarter is good news for Spain, which depends heavily on demand from France and Germany.

Spain's gross domestic product shrank by only 0.1 percent in the second quarter and the government says it expects growth of up to 0.2 percent in the second half of the year. The official outlook for 2013 GDP is a contraction of 1.3 percent.

(Reporting By Paul Day)