The CPI remained stable (0% mom) compared to the previous month. The decline in the clothing and footwear prices due to the promotional season (-1.3% mom) was compensated by higher prices in leisure and culture activities (+0.7% mom) and hotels (+0.3% mom), as well as the increase in fuels (+0.8% mom). The underlying rate also remained constant with regard to the previous month (0% mom).
Experts at ACF expect very low inflation rates for the rest of the year. Inflation was negative October (-0.1% yoy) for the first time since 2009 (see chart), and there were also negative levels in the following March. These analysts forecast a scenario “free from deflation” in Spain.
“We shouldn’t see a generalised recession in prices. The current development of the private expenditure indicators, the output gap and the capacity utilization, all show that the worst in terms of weakness in demand is over,” they add.
If all these indicators manage to recover, prices should also advance. Furthermore, if the credit were finally reactivated, the deflationist scenario would be ruled out for good –not only in Spain but also in Europe.