Spanish Consumer Prices Rise

Spanish consumer prices rose by 1.8 per cent year-on-year in August, slightly less than expected as fuel costs fell, data from the National Statistics Institute showed today.

EU-harmonised inflation for Spain eased from 1.9 per cent hit in July, which was the highest since November 2008. Consumer price rises have accelerated from a year low of 0.9 per cent in February, easing concerns Spain could succumb to disinflation.

But economists believe the weak economy could still cause the rate of price rises to slow later in the year, noting that prices were pushed higher in July as a result of a two percentage point increase in value-added tax to 18 per cent.

Spain exited an 18-month recession in the first quarter, but the economy remains weak and the government expects it to contract by 0.3 per cent this year.

August inflation for the euro zone as a whole, due tomorrow, is forecast at 1.6 per cent.

A full release of the Spanish data with a breakdown of the details, including core inflation, will be published on September 10th.