Spain inflation at zero for first time in four years

13th November 2013, Comments 1 comment

Spanish inflation slowed to zero in October, official data showed, in line with falling rates around Europe which have raised the risk of deflation that could threaten economic recovery.

Spain's inflation rate, a measure of the rise in consumer prices, slowed by half a percentage point from the previous month to zero in October, the National Statistics Institute said.

That figure was harmonised with the European Union's own data. Spain's own non-harmonised figure, which serves as its reference, indicated a negative inflation rate of 0.1 percent in October.

The slowing of the rise in consumer prices in the euro zone's fourth-biggest economy mirrored slowing inflation rates in Germany and several other European countries.

Overall inflation in the eurozone slowed to 0.7 percent in October, its lowest rate since 2009.

In Spain the underlying inflation rate, which strips out the effect of volatile prices for goods such as energy, reached an even lower level of 0.2 percent compared to the same period a year earlier.

The statistics institute said the slowing of inflation in Spain, which is timidly emerging from a two-year recession, was led by lower prices in communications, transport, education, food and alcoholic drinks.

Economists warn that if the trend continues and prices actually start to fall overall and in a lasting way, the economy can slow in a vicious cycle known as deflation.

The European Central Bank defines price stability as increases of just below 2.0 percent in its harmonised inflation yardstick.

The bank's chairman Mario Draghi warned last week that the euro zone might be facing a prolonged period of low inflation, but said he did not foresee deflation.

Spain last saw deflation in 2009, when prices fell for eight months in a row.


© 2013 AFP

1 Comment To This Article

  • Sam Tobben posted:

    on 13th November 2013, 12:19:51 - Reply

    Don't let anyone convince you that low inflation or even deflation is bad. At a time when unemployment is high and increasing and taxation is on the rise, low inflation brings some small relief to cash-strapped households whose real disposable incomes have been in decline for at least 5 years.

    Besides, the CPI is designed in such a way as to deliberately exclude key consumer necessities like food and energy which, if included, would push the measured price inflation rate higher.