Strong Fall In Spanish Inflation

Inflation Spain

Inflation fell six decimal points in November to 1.7%, the lowest in seven months in Spain. Within the deflationary evolution, almost general across components, energy process (electricity and oil) stand out. This fall has been more intense than analysts at Bankia Estudios predicted, which is why they are cutting slightly their prediction for the next few months: It will remain about the current level in December, recover in the first months of 2019 to around 2% and close the year at 1.5%.

The inflation rate for energy products has intensified the moderating trend and has slowed more than four points to 6.4%, the lowest since April, thanks to the fall in prices of both oil and electricity, in contrast increases a year ago. This, in turn, affected transport costs (3.3%, almost 2.5 less than in October) and those associated with housing (2.8% compared to 4% before).

Food stuffs also contributed to fall in inflation, given that its inflation rate reduced three decimal points to 8 year lows (1.5%), weighed down by processed foodstuffs (0.6%, the lowest level for 18 months), especially oils and fats. For its part, the inflation for fresh foods remains at 3.5%: the fall in prices of fruits compensates the increases for beans and vegetables.

In relation to inflation for services, it also reduced, although at a slower rate, one decimal point to 1.5%. This is explained by the performance mentioned above of transport and, to a lesser degree, by tourism and hotels, fruit of the lower prices for package tourism. On the other hand, education, medical services and communications had an upside impact on inflation.

The prices of non-energy industrial goods grew 0.1% in the last year, the same rate as in October. The increases in medication and articles for personal and household use contrast with the moderation of some textiles and furniture. As a consequence, the underlying inflation reduced one decimal point to 0.9%.

Lastly, harmonised inflation also reduced 6 decimal points to 1.7%, so that the difference with the Eurozone, whose figures are still provisional, is in negative territory for the first time in 7 months (- 0.3points)


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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.