July inflation in Spain soars to highest since 1992
The inflation hits 5.3 percent and is the highest rate since December 1992.14 August 2008
MADRID - Spanish consumer prices rose at their fastest pace in 16 years in the 12 months to July, but government officials said inflation has now probably peaked and price increases should start to ease before the end of the year
At 5.3 percent, the inflation rate matches the level that was seen at the height of the last recession in December 1992, according to figures published Wednesday by the National Statistics Institute (INE).
Surging fuel and food prices pushed year-on-year inflation in July.
However, inflation contracted from June by three-tenths of a percentage point, helped by sharp falls in clothing prices as summer sales kicked in.
With oil prices now receding, the government expects inflation to slow over the coming months and to end the year below four percent.
Some analysts saw the rise in underlying inflation as a clear sign that production costs are now feeding into consumer prices and could thereby push inflation even higher.
Underlying inflation, excluding energy and fresh food, rose 3.5 percent from a year earlier, up from 3.3 percent in June.
"Spain, one of the euro zone's biggest underperformers on growth, is proving unable to curb inflation at source," said José García Zárate at the 4Cast Consultancy in London.
"The slowdown is not offsetting inflationary forces."
The government said Wednesday that if the price of oil does not rise from current levels, it sees inflation receding from August onward and ending this year at below 4 percent.
The Economy Ministry said that 0.3 percent of the inflation recorded in July was due to global oil prices, which had risen by 88 percent since the beginning of the year. Global oil prices last month hit a peak of over $147 per barrel, but have retreated since then.
But Nuria Bustamante, an analyst at Caja Madrid, saw inflation ending 2008 at above 4 percent.
"We expect inflation to hit its maximum in August of 5.4 percent, falling to around 4.3 or 4.4 percent in the last three months [of the year]," she said.
The opposition Popular Party (PP) expressed concern at the latest figures. The PP's spokesman for the economy, Cristóbal Montoro, described present inflation levels as "a direct threat to the welfare of Spaniards".
Montoro reiterated calls by the PP that the government should take tougher measures to tackle Spain's serious economic problems. He blamed Prime Minister José Luis Rodríguez Zapatero for worsening the situation by denying, until recently, that the country was suffering from an economic crisis.
On Wednesday, Zapatero met with ministers to discuss the economic situation.
Spain's Chamber of Commerce said that after inflation peaks in August, the consumer price index will start to retreat slowly in 2008 and at a faster pace in 2009. The Chamber said the downturn, which has dampened consumption, will force inflation to fall, as will falling oil prices.
[El Pais / Expatica]