Spanish CPI plummets to 45-month low

The National Statistics Institute (INE by its Spanish initials) revealed on Friday that inflation moderated to +0.3% in September and at a year-on-year rate, from previous 1.5%. For its part, the monthly rate fell 0.2% versus the 0.3% increase of August.

Harmonised CPI plummeted to +0.5% from +1.6%, with a monthly rate of +0.8% (vs +0.2% of August). Both year-to-year rates are in line with expectations and preliminary data announced in early September. Regarding core inflation, it fell to 0.6% from previous 1.6%.

“It is the first time that the Spanish inflation is below the European average since 2012. (…) Even core inflation is low: we have to go back to July 2010 to find a lower reading,” expert at Barclays José Luis Martínez Campuzano explains.

These are the groups that have a bigger influence on the CPI annual variation:

Food and alcoholic beverages, whose variation diminishes to 2.5%.

Transport (especially automobiles and fuels and lubricants) falls to -1.6.

Dwelling variation fell to -1.4% due to the stability of prices in electricity, gas and distribution of water (in contrast with several price increases of September 2012).

– Annual variation in medicine dropped 4 points to 0.4% and leisure and culture went down 2 points to 0.1%.

Communications variation diminished to -5.8% due to the increase in telephonic services prices.

Other goods and services decreases its annual change nearly one point, standing at 1.3%.

“These results are the combination of the ‘knock-on’ effect of VAT on September 2012, the ‘knock-on’ effect of the increase in energy prices from last year and the internal weakness. The adjustment process in domestic prices deepens. By the end of 2013 we may see a slight recovery of the annual inflation, although I don’t expect it will be above 0.6%.”

Spanish CPI - September 2013

You may download the whole INE report here (in English): Spanish CPI_0913

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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