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Spanish Inflation Falls Back To Zero

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Spanish Inflation Falls Back To Zero

Spain’s National Institute of Statistics has just published final inflation figures for the country for the month of May, these are largely confirmation of the preliminary price growth data released earlier in June. The headline Consumer Price Index (CPI) has fallen back 20bps on the month to 0.2% from 0.4% in April, this is fully in line with market expectations. Month on month this is now reading at a flat 0% price growth, whereas this was expected to come in at 0 it represents a fall from the 0.9% experienced the previous month.

Using the European Central Banks (ECB) preferred method of calculation the picture remains much the same. The Harmonized Index of Consumer Prices (HICP) for the month of May has been confirmed at 0.2% growth when measured year on year, there is no change from expectations here but it does represent a fall from the prior month’s 0.3%. Month on month the HICP is showing no growth, the 0% figure was anticipated however it does represent a fall from the April reading of 0.6% price growth.

On a constituent parts analysis it can be seen that the key driver of the annual inflation figure is energy, this is up 3% on the year and suggests that the fragile recovery in industrial production is providing just enough activity to keep Spain’s overall price activity growth on the right side of deflation. The energy component however only contributed 0.2% month on month growth which is evidence of a slowing in demand for energy, the monthly reading is a short term and somewhat volatile indicator and as such needs to be watched over several consecutive readings for evidence of a longer term trend.

The largest drag on prices in the Spanish economy over the past 12 months has been in the food sector, this is down 2.7% on the year and 0.7% on the month.

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