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Inflation hits highest level for over 12 years in January

18 February 2008

MADRID – A spike in oil and food prices drove consumer price inflation in Spain to its highest level in over 12 years in January, the National Statistics Institute (INE) said Friday.

The INE said the consumer price index rose 4.3 percent year-on-year in the first month of the year, the biggest increase since November 1995. The rate at the end of last year was 4.2 percent. On a month-on-month basis, the CPI dropped 0.6 percent.

However, underlying inflation – which factors out volatile fresh food and energy product prices – eased for the first time in six months to 3.1 percent from 3.3 percent.

Economy Minister Pedro Solbes acknowledged the CPI was a "bad figure" but insisted the development was "more the result of international factors rather than problems specific to Spain."

Annual consumer price inflation in Portugal for the same month rose from 2.7 percent in December to 2.9 percent, its highest level in 16 months. Inflation in the euro zone in January was estimated at a record 3.2 percent.

Solbes said the price of some food products such as milk have reached a ceiling.

The secretary of state for the economy, David Vegara, predicted inflation would start to ease from March and move to levels below 3 percent by the end of the year.

He said the improved performance of underlying inflation showed that the pick up in headline consumer prices was not being passed on significantly to the rest of the economy.

The Spanish economic think-tank Fincas predicted inflation would ease to 2.3 percent by the end of this year for an average of 3.4 percent for the whole of 2008.

[Copyright EL PAÍS / Adrian Soto 2008]

Subject: Spanish news