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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